Strong response to ASIC sandbox proposal
By Jim Bulling and Michelle Chasser
ASIC’s regulatory sandbox consultation has drawn a mixed response from around 30 businesses, industry and consumer groups which have made submissions. To refresh your memory about ASIC’s proposals check out our previous blog.
Tyro Payments was very supportive of the concept of a sandbox but had a few concerns about the proposed structure. Tyro’s main concern was the role of sponsors controlling start-ups’ access to the sandbox. It noted that Australia’s associations, hubs and accelerators were dependent on funding from industry incumbents and that exposing the sandbox to their influence is like “putting the fox in charge of the hen house”. Tyro was in favour of a UK style sandbox where applicants’ transitions into licensing are considered on a case by case basis by the regulator.
The Governance Institute of Australia expressed concerns that giving conditional industry wide relief undermines ASIC’s regulatory framework. Its key objection is that participants would not have to satisfy many of the general obligations imposed on licensees including financial reporting, financial adequacy, client money, representative training and competency. It also raised the issue of whether ‘sandbox sponsors’, which are not themselves licensees, have the ability to “conduct a high level preliminary assessment of the testing business”.
Choice strongly opposed the sandbox proposal in relation to financial advice services due to the risks posed to consumers. However, Choice did make several recommendations to improve consumer protection should the sandbox go ahead, including:
- excluding personal financial advice services;
- creating a last resort compensation scheme; and
- requiring businesses to set individual monetary limits based on clients’ risk appetite and financial capacity.
The Insurance Council of Australia thought that the proposed regulatory sandbox provided a good starting point but submitted that it should be made available to new entrants and established licensees in general insurance. The Council is considering whether there are any particular issues relating to professional indemnity insurance that ASIC should be aware of in relation to the adequate compensation arrangements proposal.
ASIC is expected to respond to submissions by the end of the year and has already organised meetings with industry stakeholders to discuss the issues raised.