Sanlam Private Wealth has admitted to breaching its AFSL obligations and has provided a court enforceable undertaking to ASIC, requiring a review of its compliance processes by an independent expert.
Sanlam Private Wealth is the Australian arm of South African firm Sanlam Group and has held an AFSL since August 2009 to provide services to retail and wholesale clients.
It offers portfolio services, funds management, wealth advisory and corporate finance.
The corporate regulator said it had uncovered concerns that the firm had breached its general obligations including failing to adequately supervise its authorised representatives (ARs) and corporate authorised representatives (CARs). At the time of the inaction, Sanlam had as many as 71 ARs and 42 CARs and held them under their AFSL since 2019.
ASIC noted many of these CARs were fintechs who offered online trading platforms and crypto-based investment products to large retail client bases with large pools of investor assets.
ASIC deputy chair, Sarah Court, described the measures by Sanlam as being “plainly inadequate”.
The investigation identified that Sanlam Private Wealth:
- 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.
- Failed to implement a training program to assess its authorised representatives’ skills.
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.”
Having provided a court enforceable undertaking, Sanlam must now engage an ASIC-approved independent expert to review its systems and processes as well as provide remedial action plans to ASIC. The firm will be subject to review to ensure it is taking appropriate steps to comply with the undertaking.
In April 2024, ASIC secured a $1.25 million penalty against Lanterne Fund Services Pty Ltd for breaching its licence obligations when it failed to provide appropriate oversight of its ARs.
ASIC commenced civil penalty proceedings against Lanterne in July 2022 for a failure to meet organisational competence requirement and a failure to have adequate risk management systems. This was one of the first litigated cases related to a “licensee for hire” and the contraventions of that business model.
ASIC alleged that from 13 March 2019 to 5 October 2021, between 62 and 69 CARs operated under Lanterne’s Australian Financial Services Licence (AFSL), and between approximately 134 and 205 ARs operated under those CARs. The total funds under management of all CARS fluctuated between $1.2 billion in March 2021 and approximately $1.6 billion by the end of the relevant period.
The businesses operating as CARs under Lanterne’s AFSL included venture capital funds, managed investment schemes, agricultural advisory services, wholesale funds management services, corporate advisory services, wholesale property funds, energy trading funds, digital asset funds, and climate change advisory services.
