The entity provides a custodial service for the peer-to-peer lending service of Squirrel Money Ltd.

Custodians are required to obtain an assurance engagement with a qualified auditor within four months from 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.

The FMA found that Squirrel P2P Trustee's failed to obtain assurance engagements every year from 2016 to 2020, breaching its custodial obligations under the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014.

FMA director of supervision James Greig says 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."

Grieg says Squirrel P2P Trustee's should have been aware of these custodian regulations and has now complied with the applicable regulations in 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.