Australia – Page 7 – FinTech and Blockchain Law Watch

Australia’s first listed FinTech investment company

Sep 14 2016

By Russell Lyons, David Bath and Marie Zuo

On or around 19 October 2016, H2Ocean is proposing to list on the Australian Securities Exchange as a listed investment company (LIC). Following a successful initial public offering (IPO), H2 Ocean will become Australia’s first LIC focused on investing in early and growth stage FinTech companies. H2Ocean proposes to invest in between 15 and 50 FinTech startups which will have typically graduated from an incubator or accelator program or will be backed by a reputable venture capital firm. These startups will be based in both Australia and overseas.

The H2Ocean IPO will allow potential investors to be exposed to FinTech investments and venture capital as an alternative asset class, which might not otherwise be directly accessible to the public. This unique offering in the Australian market comes at a time where global FinTech financing is trending towards venture capital backed FinTech companies and is expected to reach a record high in 2016.

So far, H2Ocean has gained support from Mike Cannon-Brookes, Atlassian co-founder, who will be subscribing for shares in the IPO. Mike Cannon-Brookes backed Australian payments company Tyro in its $100 million capital raising at the end of 2015.

Treasurer Scott Morrison also attended the H2Ocean launch last week. With high profile supporters and as Australia’s first listed FinTech investment company, H2Ocean is another encouraging sign for Australia’s FinTech future.

Movement in marketplace lending regulation for small business loans

Sep 09 2016

By Jim Bulling and Michelle Chasser

Marketplace lenders who cater to small businesses are about to face increased regulation in relation to the credit they provide. From 12 November 2016, some businesses will receive the same protection currently available to consumers as unfair contract terms in small business contracts will become prohibited.

Small business contracts include loans which are entered into with businesses which have fewer than 20 employees for an amount less than $300,000 or less than $1 million if the term of the loan is more than 12 months.

Under the new law, a contract term will be unfair if:

it would cause a significant imbalance in the parties’ rights and obligations;
it is not reasonably necessary to protect the interests of the party who would be advantaged by the term; and
it would cause detriment to a party if the term is relied on.

Roboadvisers are Go: ASIC guidance for digital advice

Sep 04 2016

By Daniel Knight and Claire De Koeyer

The Australian Securities and Investments Commission (ASIC) this week released Regulatory Guide 255: Providing digital financial product advice to retail clients (RG). The RG clarifies how financial product advice obligations apply to providers of digital advice.

ASIC supports the development of a healthy and robust ‘digital advice’ or ‘robo-advice’ market in Australia, while recognising the need to protect consumers.

As with other advice providers, robo-advisers will need to hold an Australian Financial Services Licence (AFSL) or be authorised by an AFSL holder and will be subject to a range of duties, including the duty to act in the best interests of their clients.

Government committed to introducing mandatory data breach notification laws

Aug 22 2016

By Cameron Abbott and Rebecca Murray

After much delay, a spokesperson for Attorney-General, George Brandis has said the government is committed to introducing the Mandatory Data Breach Notification laws this year. We will be sure to look out for it during the next term of Parliament. You can find more information on the proposed scheme and its regulatory impact on the Attorney General’s Department consultation for Serious Data Breach Notification webpage.

UK grants FinTech a banking licence – another tier of regulation?

Aug 21 2016

By Jim Bulling and Michelle Chasser

Has the age of the digital bank arrived in the UK? Following the authorisation of Atom Bank last year, 3 additional digital banks have been issued with banking licences by the UK Prudential Regulation Authority (PRA) since May 2016.

These new licensees are the result of the PRA’s focus in recent years on lowering the barriers to entry for new banks and promote competition in the UK. As part of this focus, in 2013, PRA lowered the initial minimum capital requirements for Small Specialist Bank applicants to €1 million or £1 million (whichever is higher), plus a capital planning buffer (CPB). PRA and the Financial Conduct Authority (FCA) also launched a New Bank Start-up Unit in January 2016 to assist applicants with the authorisation process. Read More

Strong response to ASIC sandbox proposal

Aug 12 2016

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.

Global equity crowdfunding developments

Jul 19 2016

By Jim Bulling and Michelle Chasser

Australia’s equity crowdfunding reforms have been delayed due to the Australian federal election. After passing the House of Representatives back in February the Corporations Amendment (Crowd-sourced Funding) Bill 2015 lapsed in May when Parliament was dissolved. As the Turnbull Government was returned to power at the election it is likely the Bill will be reintroduced shortly. While crowdfunding changes have stalled in Australia developments have been continuing in the rest of the world .

Easier crowdfunding for FinTech start-ups in the USA has moved a step closer. The Fix Crowdfunding Act and the Supporting America’s Investors Act easily passed through the US House of Representatives on 6 July 2016 with bipartisan support and will now be introduced in the Senate. The Fix Crowdfunding Act will increase the maximum amount of money that a start-up can raise through crowdfunding from US$1 million to US$5 million. The Supporting America’s Investors Act increases the number of people allowed to invest in a qualifying venture capital fund from 100 up to 500. Read More

Regulators notice small business loans are big business

Jul 07 2016

By Jim Bulling and Michelle Chasser

The focus in marketplace lending appears to be shifting to small business loans recently and it is clear that small business loans are big business. The European Investment Bank has agreed to make a £100 million investment in small business loans originated through Funding Circle in the UK as part of its priority to improve access to finance for small and medium businesses. In the US marketplace lenders originated around US$1.9B in 2015 up nearly 60% from 2014.

The increased volume of small business loans has not escaped the notice of US federal regulators. There are concerns that sometimes small businesses are essentially individual entrepreneurs and may not have any more tools than consumers to assess the terms of loans offered to them. The US Treasury’s recent white paper, Opportunities and Challenges in Online Marketplace Lending, made a number of recommendations including that more robust small business borrower protections and effective oversight be introduced for online marketplace lenders. A number of regulators including the Consumer Financial Protection Bureau, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York and the Securities and Exchange Commission were contributors to that paper.

Regulatory sandbox and innovative regulation

Jun 09 2016

By Daniel Knight

Australian FinTechs are closer to getting a regulatory “sandbox” after the Australian Securities and Investments Commission (ASIC) released its detailed consultation paper this week. The paper details proposals for a testing ground for innovative robo-advice providers and other similar services. It also highlights ASIC’s views about some regulatory options already open to FinTechs under the current law, as we discussed in a previous post.

In a sign of ASIC’s engagement with this nascent sector, ASIC launched its proposals at a fintech startup founders event in Melbourne. ASIC emphasised it is seeking industry feedback and is open to making changes.

Gamification and financial services

Jun 07 2016

By Jim Bulling and Michelle Chasser

How would you use gamification to enhance the mobile and online experience for banking customers? That is the question Barclays Bank is asking developers during its Launchpad Business Challenge. Challenge applicants will have access to Barclays’ sandbox banking data and APIs to pitch their ideas. The Challenge will run for 3 weeks in June with successful applicants’ products being released on Barclays’ Launchpad platform for customers to explore and test.

Gamification involves applying game design elements and principles in non-game contexts and is used to improve user engagement and learning. A simple example of gamification is using a points based quiz to improve financial literacy.

This is not the first time that Barclays has experimented with gamification. In 2010 it released an interactive virtual city game in which players’ characters experienced the consequences of good and bad money management decisions.

Gamification is also a novel way to present important information to consumers in a way that is more approachable than traditional methods. In 2015 the Australian Securities and Investments Commission (ASIC) published a relief instrument which allows regulated disclosure documents such as Product Disclosure Documents and Financial Services Guides be disclosed in innovative ways. The accompanying good practice guidance issued by ASIC in Regulatory Guide 221 stated that disclosure documents can now incorporate a range of digital features including gamification.

Regulatory Guide 221 can be found here.

Tag:Australia