Found the solution for my issue: giving /bin/sh "Full Disk Access" got the daemon to start and operate correctly.
I noticed if I started the daemon in the foreground from a terminal, it operated fine. But if started from launchd, it couldn't access anything. The only thing I can think of is the daemon's launch agent .plist file's keyProgram/key entry points to a /bin/sh script that actually starts the daemon (to ensure the PATH is correct, and various flags like coredump size unlimited, and some other checks to see if networking and file server access is operating before starting the actual daemon)
erco7777
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Same problem here with a setuid root daemon on Catalina; granted full disk access to it, rebooted, but still "Operation not permitted". The only thing that does work for sure is to disable SIP, making it clear the issue is SIP related. Looking for a better solution, but..