RG 104 Compliance Framework Checklist for AFSLs

What Is RG 104?

RG 104 is ASIC's regulatory guide on the general obligations of AFSL holders. It sets out expectations for how licensees should structure their compliance framework, manage risk, and ensure their representatives meet the required standards. A well-designed compliance framework is essential for maintaining a licence.

Risk Management Systems

AFSL holders must have adequate risk management systems in place. This includes identifying, assessing, and managing the risks associated with their financial services business. The systems should be documented, regularly reviewed, and updated as the business changes.

Organisational Competence

Licensees must ensure that their responsible managers and representatives have the competence to provide the financial services covered by the licence. This includes appropriate training, supervision, and ongoing professional development. Organisational competence is not just about individuals — it is about the overall capability of the business.

Compliance Arrangements

AFSL holders must have robust compliance arrangements that ensure they meet their obligations under the Corporations Act and their licence conditions. This includes monitoring adviser conduct, reviewing SOAs and client files, handling complaints, and reporting breaches to ASIC where required.

Consumer Protection

These compliance requirements exist to protect consumers. When a licensee has strong risk management and compliance systems, the advice you receive is more likely to meet regulatory standards. If you have concerns about advice you received, the licensee's compliance framework is where the issue should have been caught.

Key Requirements Under RG 104

ASIC Regulatory Guide 104 (RG 104) sets out ASIC's expectations for licensing and compliance frameworks for AFS licensees. The key requirements include: adequate financial resources (capital adequacy, PI insurance, compensation arrangements), adequate human resources (trained and competent staff, responsible manager), adequate technological resources (systems, data management, cyber security), and a robust compliance framework (policies, procedures, monitoring, remediation).

RG 104 emphasises the importance of a "compliance culture" within the licensee. This means compliance is not just about having policies and procedures on paper — it must be embedded in the day-to-day operations of the business. Senior management must demonstrate commitment to compliance, and there must be clear accountability for compliance failures.

Compliance Framework Components

An effective compliance framework under RG 104 includes several key components. First, a compliance policies and procedures manual covering all AFSL activities. Second, a monitoring program that includes regular file reviews, compliance reporting, and risk assessments. Third, a training program ensuring all representatives understand their obligations. Fourth, a complaints handling process that meets ASIC requirements. Fifth, a remediation process for addressing compliance failures.

The compliance framework should be documented and maintained as a living document — updated whenever there are changes to the licensee's activities, regulatory requirements, or business structure. The responsible manager should review the compliance framework at least annually and report to the board or senior management on its effectiveness.

RG 104 Checklist for Licensees

A practical RG 104 compliance checklist includes: do you have a documented compliance manual? Is your responsible manager appropriately qualified and experienced? Do you conduct regular file reviews (at least 10-20% of files per year)? Do you have adequate PI insurance (at least $2 million cover for most licensees)? Do you have a complaints handling process that meets ASIC standards? Do you conduct regular training on compliance obligations?

Additional checklist items: do you have a business continuity plan? Do you have cyber security measures in place? Do you monitor representatives for compliance? Do you have a process for handling conflicts of interest? Do you maintain accurate records of advice, training, and complaints? Do you have adequate financial resources including net tangible assets? Each licensee should develop a tailored checklist based on their specific AFSL conditions.

Frequently Asked Questions

Does RG 104 apply to all AFS licensees equally?
No. RG 104 applies to all licensees, but the requirements are scaled to the size, complexity, and risk profile of the licensee. A large licensee with hundreds of advisers will have more extensive requirements than a sole trader with a limited AFSL.

How often should the compliance framework be reviewed?
At least annually, or more frequently if there are significant changes to the business or regulatory environment. The responsible manager should document the review and any actions taken as a result.

What are the minimum PI insurance requirements?
While there is no statutory minimum, ASIC expects licensees to hold PI insurance that is adequate for the nature and scale of their operations. Industry practice is typically $2 million to $10 million cover per claim, based on the number of advisers and types of advice provided.

Can a small licensee have a simpler compliance framework?
Yes. ASIC adopts a proportionality principle in RG 104 — the compliance framework should be appropriate for the licensee's business. A small licensee can have a simpler framework, provided it still addresses all key requirements and is effectively implemented.

Regulatory Context

Advising rules have shifted repeatedly over the past ten years. The FOFA reforms set the foundation in 2013 with the best interests duty and a ban on conflicted remuneration. More recently, DBFO (2024-25) retired the Fee Disclosure Statement, streamlined how ongoing fees are consented to, and put super-based fee deductions on clearer legal ground. Meanwhile, the Quality of Advice Review (2022) continues to push simplification — shorter SOAs and a new class of adviser — with Tranche 2 legislation in draft as at March 2025.