The Australian arm of South African financial services conglomerate Sanlam Group will need to have its compliance processes reviewed by an independent expert after it admitted to breaching its licensee obligations and provided a court enforceable undertaking (CEU) to the Australian Securities and Investments Commission (ASIC).
In a statement on 23 December, ASIC said its investigation into Sanlam Private Wealth Pty Ltd (Sanlam) uncovered concerns that the Australian financial services licensee had breached its general obligations, including by failing to adequately supervise its many authorised representatives and corporate authorised representatives (CARs).
A number of those CARs were fintechs who offered online trading platforms and crypto-based investment products that posed risks to retail clients.
ASIC deputy chair Sarah Court said: "At one point, Sanlam had 42 CARs and 71 authorised representatives operating under its licence. Despite this, it had plainly inadequate resources and processes to ensure its diverse cohort of authorised entities complied with the law and to oversee those who used its licence to offer risky financial products to retail clients.
"Licensees like Sanlam must have robust compliance processes that are fit-for-purpose to ensure that those who operate under their licence comply with the law and don’t place Australian investors at risk."
Sanlam’s CARs offered diverse financial services ranging from traditional share trading to emerging fintech services. Some of its fintech CARs managed large pools of investor assets and serviced large retail client bases.
ASIC’s investigation identified that Sanlam did not have adequate review processes to assess whether its representatives complied with financial services laws, had limited risk management systems that did not address the distinct risks for each division of its financial services business, had inadequate human resources dedicated to risk management and compliance, had an inadequate number of responsible managers with suitable expertise to cover the diversity of the financial services offered by its CARs, and failed to implement a training program to assess its authorised representatives’ skills.
As part of the CEU, Sanlam must engage an ASIC-approved independent expert to review its systems and processes. It must also provide remedial action plans to ASIC and the independent expert, which ASIC and the independent expert will review to ensure Sanlam is taking appropriate steps to comply with the CEU.
Sanlam has held an Australian Financial Services licence since August 2009 and is authorised to provide financial services to retail and wholesale clients. Since at least 2019, Sanlam has appointed authorised representatives and CARs under its licence to provide financial services on its behalf.
