The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko has formally warned Squirrel P2P Trustee Limited for failing to carry out certain obligations as a custodian. The entity provides a custodial service for the peer-to-peer lending service of Squirrel Money Limited.
Custodians¹ are required to obtain an assurance engagement with a qualified auditor within four months after the end of a financial year or other relevant date. An assurance engagement is an independent review that assesses whether a custodian’s processes, procedures and controls were suitably designed and operate effectively throughout the most recently completed relevant period.
Following an enquiry, the FMA was satisfied that Squirrel P2P Trustee Limited failed to obtain assurance engagements in each year from 2016 to 2020 (inclusive). This was a breach of its custodian obligations under the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014.²
James Greig, FMA Director of Supervision said: “Assurance engagements are a critical backstop to ensure a custodian is fulfilling its role and investor money is being held appropriately. Failure to obtain an assurance engagement can result in significant client harm because the custodian may not identify and address any deficiencies in its processes, procedures, and controls.
“Squirrel P2P Trustee Limited should have been aware of these custodian regulations,” Mr Greig said.
Squirrel P2P Trustee Limited has complied with the applicable regulations in 2021 by obtaining an assurance engagement within four months after the relevant date of 31 March 2021.
Squirrel Money had 1,416 P2P clients and $35.5m of investor funds, as at 31 March 2021.
The warning was issued under s9 of the Financial Markets Authority Act 2011.
Download the FMA warning to Squirrel P2P Trustee Limited PDF.
¹ Custodians hold client money on trust, separate from the custodian’s own money, to ensure it is protected from the risk of loss that may occur with the business, such as insolvency.
² Under the Financial Services Legislation Amendment Act 2019, the Financial Advisers Act 2008 was repealed, and the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014 were revoked, in March 2021. Custodian obligations are now contained in the Financial Markets Conduct Act 2013 and the Financial Market Conduct Regulations 2014.
This news item was originally published by the Financial Markets Authority (FMA NZ). For more information, please see the Source Link.