The Australian financial services regulator has pinged the former licensee of trading platforms Sharesies and Stake across the Tasman over lax compliance protocols.
Under a ‘court enforceable undertaking’ handed down at the end of December, the Australian branch of the South Africa-headquartered financial services giant, Sanlam Group, will face a review of its compliance operations by an independent expert.
According to the Australian Securities and Investments Commission (ASIC), a probe into Sanlam Private Wealth uncovered a number of licence breaches including a failure “to adequately supervise its many authorised representatives and corporate authorised representatives (CARs)”.
The CAR rules are similar to the ‘authorised body’ system in the NZ financial advisory licensing system where one entity can assume legal compliance responsibilities for external businesses.
However, the much broader Australian financial licensing regime captures firms such as online trading platforms that are lightly regulated in NZ.
As a ‘licensee for hire’ Sanlam Private Wealth attracted a diverse CAR clientele including “fintechs who offered online trading platforms and crypto-based investment products that posed risks to retail clients”, the Australian regulator says in a release.
Sarah Court, ASIC deputy chair, said in the statement: “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.”
For example, until mid-2024 Sanlam served as the legal front for Sharesies and Stake that compete in the retail online share-trading game on both sides of the ditch.
Sharesies moved to its own Australian Financial Services Licence (AFSL) last April while Stake followed suit in July.
ASIC has focused on AFSL-renters over the last couple of years, following up a ‘reminder’ notice’ in 2022 with a court win in April 2024 that saw Lanterne Fund Services stung with a A$1.25 million fine.
Lanterne held a licensing umbrella over 60 CARs and 205 authorised representatives involved in various funds management and advisory fields.
Just over a year ago, ASIC also published a review of online trading providers that found a number of “concerning” practices including the use of outsourced licensing.
“We will continue to monitor the practices, business structures and product offerings of online trading providers,” the December 2023 report notes. “Where we identify significant harm, we will consider the full range of regulatory actions available including, where appropriate, civil or criminal enforcement action.”
Platforms such as Sharesies are classified as Investor Directed Portfolio Services in Australia and require a licence to operate.
Sanlam describes itself as the “largest non-banking financial services group on the African continent” with a market-leading position across the “life insurance, general insurance, and investment management” sectors in South Africa.