Sequoia ramps up APL scrutiny with new committee

Danielle Press, a former ASIC commissioner, is to chair a new AFSL committee set up by Sequoia which seeks to improve governance practices. 

Sequoia has been under fire over its role in the failures of the Shield Master Fund and the First Guardian Master Fund, both of which saw heavy flows coming from advice firms linked to Ferras Merhi – either through his firm Venture Egg or others that his own AFSL had authorised.

InterPrac, which is a wholly owned subsidiary of Sequoia, had authorised both Merhi and Venture Egg until cutting ties at the end of May.

In what appears to be a move aimed at combatting the growing questions and its declining reputation, where shares are down 27 per cent since the start of the year, the ASX-listed company has brought Press in to head the new committee.

“This new committee reflects Sequoia’s ongoing commitment to the highest standards of regulatory alignment, governance maturity and risk management,” the firm said in a statement.

“It introduces an elevated and independent governance layer above the operational compliance structures of each AFSL and will in conjunction with the executive report to the SEQ boards risk and compliance committee.”

Alongside her five years as a commissioner at the corporate regulator, Press has spent more than 30 years in the financial services sector, including chief executive roles at both Equip Super and The Myer Family Company, as well as managing director of UBS Global Asset Management (Australia).

The governance committee also isn’t her only current position, having joined Insignia Financial’s Trustees Board as chair in September last year. She also chairs the Customer Owned Banking Code Compliance Committee and is a non-executive director at Infrastructure Specialist Asset Management and Income Asset Management Group.

“I am pleased to join Sequoia Financial Group in this important governance initiative,” Press said. “Strong oversight and a robust compliance culture are fundamental to maintaining trust and delivering sustainable outcomes for clients, shareholders and regulators.

“The creation of this committee demonstrates Sequoia’s proactive approach to regulatory accountability, and I look forward to working closely with the team to uphold and strengthen the group’s AFSL governance framework.”

Sequoia also added former IG Markets Asia-Pacific managing director Matthew Wilson as the independent chair of each of the AFSL investment committees. Wilson boasts a long career in financial services, having headed up IMG Sports Technology Group and previously holding a number of stockbroking and investment product development senior executive roles at Deutsche Bank.

The firm said his “expertise across advice, stockbroking and product development will be critical in supporting the governance and oversight of each licensee’s approved product list”.

Wilson said he would provide “independent oversight and review processes to determine relevant research providers, ratings agencies and investment sources it incorporates”.

“This ensures the approved product lists (APLs) advisers rely on are robust, well-vetted and aligned with the highest level of risk and compliance standards,” he said.

“This additional oversight will empower advisers with the tools and research they need to deliver high-quality, client-centric advice. I am committed to supporting each AFSL’s investment committee with best practice governance frameworks that reinforce consistent and strategic decision-making across the group.”

The pair will not be alone on the committee, with CEO Garry Crole, head of licensee and adviser services division Daryl Stout, head of legal Justin Harding, director of Sequoia Wealth Management and Sequoia Asset Management Hamish McCathie, senior risk and compliance manager AFSL licensing Mark Hutchison, and head of InterPrac compliance operations Steve Kallona also serving as members.

Last month, ASIC chair Joe Longo stated advice licensees are “the first line of defence” against product failures and urged them to monitor their APLs. ASIC has doubled the number of financial advice-related investigations commenced since last year and described them as “the most complex and resource-intensive investigations” it has conducted.

Speaking at the Financial Services Council conference in Sydney, he said: “There’s a reason why we are focusing on the role of licensees in our enforcement work – you are the first line of defence. You must have strong quality controls for your approved product lists.

“If you are a licensee who has engaged the service of a sales referral source, you should have in place adequate monitoring and supervision arrangements to detect concerning conduct and to make sure your advisers are acting in the best interests of their clients.

“We need to be asking what payments are being made to lead generators, financial advisers, and their respective licensees along the way. What links are there between the property developers, responsible entities, and financial advisers? And are our existing conflicted remuneration and conflicts of interest rules robust enough to manage this tangled web?”