Category: FinTech Industry & Regulation

1
EU supervisors scrutinise FinTech sandboxes and innovation hubs
2
ASIC publishes report on its review of the ‘buy now, pay later’ industry
3
UK’s Green FinTech Challenge
4
Fintech Lenders To Face Senate Inquiry
5
ASIC enters into bilateral cross border cooperation agreement with US regulator
6
Offshore entities – ACCC Guidance on Open Banking Accreditation
7
Worldwide Cryptocurrency AML Standards
8
ASIC acts on Initial Coin Offerings and crypto-asset funds
9
UAE Securities and Commodities Authority to Regulate ICOs and Join Growing List of Regulators
10
Design & Distribution Bill: A Reflection of the Current “Consumer-Centric” Climate

EU supervisors scrutinise FinTech sandboxes and innovation hubs

By Giovanni Campi and Martina Topercerova

The European Supervisory Authorities (ESAs), including the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA), have published a report setting out a comparative analysis and best practices in the design and operation of sandboxes and innovation hubs (“innovation facilitators”) established in the European Economic Area. The report was requested by the European Commission in its FinTech Action plan, as part of its efforts to enable innovative businesses to reach EU-wide scale.

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ASIC publishes report on its review of the ‘buy now, pay later’ industry

By Jim Bulling, Felix Charlesworth and Edwin Tan

On 28 November 2018, ASIC published Report 600: Review of buy now pay later arrangements (Report). The Report is the product of ASIC’s 10 month investigation into the industry. It examines the conduct, structure and arrangements of 6 buy now pay later providers including Afterpay and zipPay (Providers). The Report also notes that the responsible lending obligations of the National Consumer Credit Protection Act which require credit providers to, among other things, assess a consumer’s financial position, do not apply to buy now pay later arrangements.

The Report looks at the exponential growth of the industry from over 50,000 transactions in April 2016 to 1.9 million transactions in June 2018. While the average value of transactions under these arrangements has decreased, the outstanding debt in this time has roughly doubled to over $903 million.

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UK’s Green FinTech Challenge

By Jonathan Lawrence

The UK’s Financial Conduct Authority has launched its Green FinTech Challenge. This is aimed at firms developing green financial technology solutions that need specific regulatory support to bring their proposition to market. The Challenge is designed to support innovation and growth in the Green Finance sector as part of the UK government’s Green GB Week which started on 15 October 2018.

Firms that require specific regulatory support are invited to apply. The Challenge will provide support to a selection of firms developing innovative products and services to assist in the UK’s transition to a greener economy. It is open to start-ups, incumbents and technology providers.

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Fintech Lenders To Face Senate Inquiry

By Jim Bulling and Edwin Tan

On 17 October 2018, the Senate resolved to refer certain credit service providers, including payday lenders, fintech “buy now, pay later” providers and credit repair agencies to the Senate Economics References Committee for inquiry.  Under the proposed terms of reference, the inquiry will look at:

  • the impact of the service providers on individuals, communities and the broader financial system;
  • whether current regulation of the service providers meets community standards and expectations;
  • whether reform is needed to address harm being caused to consumers; and
  • the present capacity and capability of the financial counselling sector to provide financial counselling services to financially stressed and distressed members of the community.

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ASIC enters into bilateral cross border cooperation agreement with US regulator

By Jim Bulling, Felix Charlesworth and Edwin Tan

On 4 October 2018, the Australian Securities and Investments Commission (ASIC) entered into the ‘Cooperation Arrangement on Financial Technology Innovation’ bilateral agreement (Agreement) with the US Commodity Futures Trading Commission (CFTC) to cooperate and exchange information in the fintech and regtech industries in each jurisdiction. Broadly, the Agreement seeks to enhance mutual understanding, identify market developments and trends, facilitate fintech innovation and foster the use of more efficient and effective regtech.

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Offshore entities – ACCC Guidance on Open Banking Accreditation

By Jim Bulling and Felix Charlesworth

As part of its release of the ‘Consumer Data Right Rules Framework’ (Framework), the Australian Competition and Consumer Commission (ACCC) has outlined its accreditation process for entities seeking to become accredited data recipients under the Open Banking Regime.

While Authorised Deposit-taking Institutions (ADIs) will have access to a streamlined accreditation process, all other applicants will need to meet criteria such as:

  • whether they satisfy a ‘fit and proper’ person test;
  • the appropriateness and proportionality of the applicant’s systems, resources and procedures;
  • the adequacy of the applicant’s internal and external dispute resolution processes; and
  • whether the applicant holds appropriate insurance.

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Worldwide Cryptocurrency AML Standards

By Jonathan Lawrence

On 19 September, the president of the Financial Action Task Force (FATF), Marshall Billingslea, said he is optimistic that at its plenary, due in October 2018, the FATF will agree a series of updated standards. He said: “It is essential that we establish a global set of standards that are applied in a uniform manner”. He said that the task force has accelerated its work and made significant progress on reaching a “consensus across nations” after the G20 requested the organisation tackle the issue as a matter of urgency.

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ASIC acts on Initial Coin Offerings and crypto-asset funds

By Jim Bulling, Edwin Tan and Felix Charlesworth

In a statement issued today, the Australian Securities and Investments Commission (ASIC) revealed that it has prevented five Initial Coin Offerings (ICOs) from raising capital and will be taking further action in respect of one completed ICO.  The ICOs have been put on hold and some will be restructured to comply with relevant laws and regulations.  ASIC has also issued a final stop order in respect of a Product Disclosure Statement (PDS) issued by Investors Exchange Limited for units in the New Dawn Fund, which proposed to invest in a range of cryptocurrency assets.

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UAE Securities and Commodities Authority to Regulate ICOs and Join Growing List of Regulators

By Jim Bulling and Edwin Tan

On 16 September 2018, the UAE Securities and Commodities Authority’s (SCA) chairman Sultan bin Saeed Al Mansouri announced that the SCA would regulate initial coin offerings (ICOs) and recognise them as securities, as well as introduce controls for trading digital tokens.  The statement reads: In light of the rapid development of the digital tokens market and the response thereto by the regulators in a number of countries worldwide towards regulating the initial coin offerings, the SCA Board of Directors has approved the SCA plan to regulate the ICOs and recognise them as securities”.

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Design & Distribution Bill: A Reflection of the Current “Consumer-Centric” Climate

By Jim Bulling, Daniel Knight and Elise Hamblin

Misaligned advisor interests.  Consumer disengagement.  Low financial literacy in the face of complex documents.

These themes echo throughout the revised Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Bill (Bill) released by the Australian Government in late July 2018.  These issues have also been recently ventilated in the Banking Royal Commission. Key changes to the Bill include expanding the scope of regulated products and criminal penalties have been increased for certain breaches.

While the protection of consumers lies at the heart of this Bill, it poses real challenges for issuers and distributors.  In particular, the Government’s power to stop distribution of financial products raises significant practical difficulties.  Moreover, the increased criminal penalties are indicative of the seriousness with which breaches will be treated.  While the changes will not come into force for at least two years, distributors and issuers should begin preparing for the implications of this Bill now.

Please see our latest thinking on the K&L Gates HUB here for an in-depth consideration of the revised Bill.

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