Investment manager

Sarasin fined for “willful” misconduct by investment manager

Wealth manager Sarasin has been fined for risking the total loss of his clients’ assets after an investment manager the company hired knowingly broke the rules by pouring his cash into a single fund.

a Central Bank fined Sarasin Funds Management (Ireland) Ltd € 385,000 for this violation, which occurred in 2017 when the external manager “deliberately violated certain investment concentration restrictions” during the merger of two funds.

The investment manager, who was not named in the central bank’s enforcement notice, sold a fund’s assets and reinvested most of the cash proceeds in an exchange-traded fund (ETF) . The transaction exceeded risk concentration limits and left investors exposed to “the possible failure of a single investment,” according to the central bank.

Sarasin was held liable for the breach because its offshore fund company failed to properly monitor the functions it delegated to the investment manager.

“The company did not ask its delegate to keep abreast of the progress of the merger of two funds, despite the risks inherent in the merger,” said Seána Cunningham, director of law enforcement at the Central bank.

“More generally, the firm and its delegates did not follow the reporting and communication procedures described in the firm’s own business plan.”

The Central Bank found that Sarasin Funds Management was unaware of the investment manager’s breach for eight weeks, even though the transaction violated Sarasin’s own rule on concentration risk.

Central Bank regulations state that only 20% of a fund’s assets can be invested in a single security, but Sarasin’s own prospectus sets the limit at 10%.

The investment manager has placed over 94% of a fund’s client assets in a single ETF.

The breach also occurred while the designated director of compliance oversight was on sabbatical without a replacement.

In addition, the Central Bank found that Sarasin Funds Management’s board of directors confirmed at its quarterly meetings that it had received reports from the investment manager which it had in fact not received.

“It is a particularly disturbing finding of this investigation as the Council has repeatedly confirmed in the minutes of its own meetings that it has received certain reports from delegates when in fact it did not.” said Ms Cunningham.

“This is well below the level of challenge and scrutiny required of the company to meet its regulatory obligations.”


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