Background
In December 2021, the Financial Markets Authority (FMA) issued a formal warning to Squirrel P2P Trustee Limited for failing to meet its statutory obligations as a custodian for peer‑to‑peer lending services provided by Squirrel Money Limited. The warning followed an FMA enquiry that identified a sustained period of non‑compliance with assurance engagement requirements.
Custodians are legally required to obtain an independent assurance engagement from a qualified auditor within four months of the end of each financial year. These engagements are intended to assess whether custodial processes, procedures, and controls are appropriately designed and operating effectively. The FMA found that Squirrel P2P Trustee Limited failed to obtain the required assurance engagements for five consecutive years, from 2016 to 2020 (inclusive), constituting a breach of the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014.
The entity remedied this non‑compliance in 2021, obtaining the required assurance engagement within the prescribed timeframe following the relevant date of 31 March 2021. At that time, Squirrel Money Limited serviced 1,416 peer‑to‑peer clients and held $35.5 million in investor funds, highlighting the scale of customer and investor exposure during the period of non‑compliance.
The warning was issued under section 9 of the Financial Markets Authority Act 2011, reflecting the FMA’s supervisory response to governance and control failures, while acknowledging subsequent corrective action taken by the custodian.
