ASIC update on fintech regulatory sandbox proposal
By Jim Bulling and Jack Fraser
ASIC has put out a media release on the proposed regulatory sandbox licensing exemption and will release a public consultation paper on the proposal in June of this year. The purpose of the sandbox is to foster innovation in the FinTech industry by allowing eligible businesses to test their products in the market without initially being subject to the usual regulatory mechanisms and requirements.
ASIC Commissioner John Price said that this “consultation paper will seek feedback on additional steps that ASIC may take to facilitate fintech innovation while maintaining protections to ensure investor and consumer trust and confidence”.
ASIC’s current proposal is for the regulatory sandbox exemption to provide a 6 month period in which a financial services license is not required and the consultation paper will address:
- categories of financial services and products that will be eligible for the sandbox;
- limits on the number of retail clients that can participate (for example up to 100), and associated monetary exposure limits;
- consumer protections. For example membership of an external dispute resolution scheme and the existence and adequacy of compensation arrangements; and
- modified conduct and disclosure obligations.
The UK Financial Conduct Authority (FCA) is slightly ahead of ASIC in relation to its own regulatory sandbox. Applications for the limited number of places in the first batch can be made from 9 May 2016 to 8 July 2016. The UK sandbox eligibility criteria include:
- the idea is a genuine innovation;
- there is a consumer benefit;
- there is a need to use the sandbox; and
- the firm is ready for testing.
It is unclear at this stage whether ASIC will adopt a similar application window and approval process but if they do, applicants should be ready to move quickly to ensure that all the available places are not taken by others.
ASIC’s media release can be found here.