Having a long-term investment saving plan requires that you feel secure about where your money is being kept. That’s why, when it comes to opening an investment plan with us, we understand you want to be sure that Sarwa is a safe place to store your wealth.
Irrespective of your risk profile as a Sarwa user, you should understand that we have put policies in place to ensure that your funds are safe.
To help you understand the safety measures put in place, we are going to dive into the main strategies and systems that we at Sarwa have in order to protect your funds and your data.
We’ll cover:
- Custodian banking and the safety of your assets
- Compliance with regulations
- Professional indemnity insurance
- Data security
[Do you want a safe investment platform where you can create a diversified portfolio to achieve your financial goals? Sign up for Sarwa to gain access to our saving and investment products.]
- Custodian banking and the safety of your assets
What is the custodian banking system?
At Sarwa, we use a custodian banking structure that ensures that our accounts are separate and distinct from the accounts which hold our clients’ assets.
A custodian bank is a financial institution which safely holds other peoples’ assets (stocks, bonds, exchange-traded funds, etc.) in a trust. Unlike commercial banks, custodian banks do not accept deposits or create money through fractional reserve banking. Consequently, they are immune from the bank runs that are foundational to bank crashes.
What happens to your assets when a custodian bank fails?
Moreover, even in the event that a custodian bank goes under (perhaps due to the failure of the parent company), all the assets held on behalf of their clients will return to those clients, who can then store them with another custodian. According to Institutional Investor, a financial website, when a custodian bank goes under, “Physical assets like stock certificates and title documents are automatically collectible and transferable by the owner to another bank.”
Therefore, users of our products can rest assured that their assets (global and US stocks, bonds, and ETFs) and cash are safe irrespective of what happens to the custodian bank.
Which custodian banks does Sarwa work with?
Since our launch in 2017, it has been one of Sarwa’s top directives to only work with globally reputable partners and banks for these purposes. This mission has helped us further ensure security and transparency to our clients.
For Sarwa Invest X (our passive investing product) and Sarwa Save (an online money saving plan), we partner with a credible, popular, large, and well-regulated custodian bank: Saxo Bank in Denmark, which is regulated by one of the EU’s top financial regulators, namely Finanstilsynet, the Danish Financial Supervisory Authority (FSA). One of FSA’s key focus is that Danish banks must ensure that the client’s rights to their securities are at all times protected, even in the case of a default (bank failure).
Also, as a member of the European Union, Denmark has incorporated the EU Banking and Investment Directives into Danish law.
Furthermore, the Saxo Bank Group is very well capitalised, with a CET1 (Common Equity Tier 1) Ratio of 24% (which is typically 13-18% for banks). This ratio, which measures a company’s ability to withstand financial distress, shows that Saxo Bank has low-risk levels and is well-grounded and equipped to survive any financial distress. Also, the bank has no exposure to long-term bonds, promotes no-risk lending, and adopts a low-risk business model.
Saxo Capital Markets likewise has a Global Custodial Service Agreement with Citi Bank, the third largest bank in the US.
For Sarwa Trade, we partner with Alpaca Securities. Securities in accounts carried and cleared by Alpaca Securities are protected in accordance with both Standard and Excess SIPC (Securities Investor Protection Corporation). For standard SIPC, securities are secured up to $500,000 (including up to $250,000 for uninvested cash). Excess SIPC coverage means that Alpaca Securities LLC will have an impressive total aggregate limit of liability of $150 million, ensuring your Sarwa Trade account/s with $30M dedicated to securities and a cash limit of $1M.
Assets purchased on Sarwa Trade are held with BMO Harris, an independent subsidiary of the BMO Financial Group, which is the eighth largest bank in North America.
For Sarwa Crypto (our crypto trading platform), we partner with Alpaca Crypto which keeps custody of assets with Fireblocks, the first crypto tech company to be certified by the International Organization for Standards in security (ISO 27001), cloud (ISO 27017), and privacy (ISO 27018).
However, note that cryptocurrencies are not stocks and so are not protected by either FDIC or SIPC.
More importantly, as a company that is very serious about your funds’ security, we conduct regular due diligence to assess the financial strength and risk management practices of our banking partners.
What happens if Sarwa fails?
Here you may be asking, “I understand that my assets are safe if the custodian bank fails, but what if Sarwa itself fails?”
All investment assets managed by Sarwa will always be held in large institutions in accounts that are segregated from Sarwa’s corporate finances. Sarwa holds a completely separate account for its own operations.
Therefore, the failure of Sarwa as a company will not affect your funds. If that happens, the custodian bank will only transfer your assets to another digital financial advisor, personal finance app, or trading platform. If you wish, you can also sell off your investments, convert the USD to AED and withdraw to your local bank account.
- Compliance with regulations
In addition to the custodian system, Sarwa also protects your money by complying with all applicable regulations.
Sarwa Digital Wealth (Capital) Limited is regulated by the Financial Services Regulatory Authority (“FSRA”) in the Abu Dhabi Global Markets (“ADGM”) to provide financial advisory and asset management services.
Likewise, Sarwa Digital Wealth Limited is regulated by the Dubai Financial Services Authority (“DFSA”) in the Dubai International Financial Center (“DIFC”) to provide financial advisory services.
Sarwa Crypto, Sarwa Trade, and Sarwa Save are products offered through Sarwa Digital Wealth (Capital) Limited that is regulated by the FSRA. These offerings are not regulated by the DFSA and are not offered to DIFC clients
Sarwa adheres to the strict laws and regulations of both entities. We have an Asset Manager License in the United Arab Emirates, which requires a very high standard of compliance, including strict regular audits. We are also required to perform safety-checks, file detailed financials, and immediately report any problems to regulators.
Compliance with these regulations ensures that our services are safe, secure, and transparent.
How well capitalised is Sarwa in case of market turmoil?
Regulators also ensure that financial firms (including personal finance apps like ours) maintain a minimum amount of prescribed capital in liquid form as a cushion for unforeseen circumstances.
Sarwa is very well capitalised with strong backers such as Mubadala Investment Company. And as we have seen above, our banking partners that hold client funds are well-regulated, top-tier banks with sound balance sheets and risk management practices.
- Professional indemnity insurance
According to the Association of British Insurers, “Professional indemnity insurance covers the cost of compensating clients for loss or damage resulting from negligent services or advice provided by a business or an individual.”
A professional indemnity insurance is one of the regulatory standards set for asset managers in the UAE. This gives clients the confidence that their wealth advisors will take their duty of care seriously.
As a company that prizes compliance highly, we have professional indemnity insurance coverage in place.
[For more on how Sarwa keeps your funds safe, check our FAQs page]
How does Sarwa keep your money and data safe?
As a fintech committed to the safety of clients, we have put in place these three essential measures:
Bank-level Security
We use secure servers and privacy verified by physical security. We adhere to industry standards for protecting and securing your data while having strict internal policies to ensure that we offer the highest level of security.
Account safety
Our internal team continuously evaluates risks across our platform. Our external security firm tests our security controls to ensure we’re implementing the industry’s best practices. Finally, regulators audit our procedures and processes on an annual basis.
Encryption
Our platform is secured with 256-bit encryption. We use it to keep your account information safe including all personal information. We also have continuous back-up and firewall technology to ensure that your information is always available.
We understand that safety, security, and transparency must play a crucial role in the management of something as important as your financial future.
That is why we also hold an interactive webinar on a biweekly basis to address any questions you still have in mind.
With the security guardrails we have in place, you can confidently save or invest your money with us as part of your personal finance management.
[Are you ready to start building wealth for the future YOU? Sign up for any of our low-cost products that match your investment strategy – Sarwa Save, Sarwa Invest, Sarwa Bitcoin, Sarwa Trade, or Sarwa Crypto.]
Takeaways
- Sarwa holds clients’ funds within the custodian banking system, ensuring the isolation and protection of your capital and compliance with DIFC regulations.
- You can keep saving and investing your money with Sarwa undistracted. Sarwa will continue to do its due diligence to ensure that your funds are always safe.