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Highlights
- - ASIC orders compliance review of SLA over supervisory lapses.
- - Investigation uncovers failures in oversight of fintech representatives.
- - Concerns grow over "license for hire" model in financial services.
The Australian Securities and Investments Commission (ASIC) has taken action against SLA, a subsidiary of South African financial conglomerate Sanlam Group, for significant shortcomings in its compliance processes. The regulatory body ordered an independent review of the company's operations following its admission of breaches as an Australian Financial Services (AFS) licensee.
A prolonged investigation revealed SLA failed to adequately oversee its network of authorized representatives and corporate authorized representatives (CARs), including share trading and investment platforms. These platforms collectively serve over a million Australian users and manage assets exceeding a billion dollars. The lapses have raised concerns about the company’s ability to ensure compliance with legal and regulatory standards.
According to ASIC, the company operated with insufficient resources and processes to supervise its diverse representatives effectively. At one point, SLA managed 42 CARs and 71 authorized representatives under its license. However, its compliance systems were described as "plainly inadequate" for the scope and complexity of its operations.
ASIC deputy chair Sarah Court emphasized the importance of robust compliance measures. She highlighted that AFS licensees must have effective systems to monitor those operating under their license, especially when offering financial products to retail clients. The lack of oversight, she noted, exposes Australian users to unnecessary risks.
The investigation also sheds light on the broader industry practice of "license for hire." This model allows companies like SLA to lend their AFS license to other entities, taking on supervisory responsibilities. However, critics argue this practice enables companies with insufficient oversight to operate unchecked, raising questions about consumer protection.
Industry insiders have expressed growing concern over these practices. They fear that companies leveraging such models might prioritize expansion over compliance, putting customers and their investments at risk. The case of SLA underscores the need for enhanced regulatory measures to ensure entities holding AFS licenses uphold their obligations.
ASIC’s directive for an independent compliance review marks a critical step in addressing these issues. The review will likely assess whether SLA has implemented changes to mitigate risks and establish more effective supervisory systems. This development highlights the increasing scrutiny facing financial services providers operating within the "license for hire" framework.
