On October 24, the Australian Government released exposure draft legislation and regulations to create an enhanced regulatory sandbox to support innovation in financial services. The press release describes the proposed legislative package as a game changer for competition in the financial services sector.
The enhanced regulatory sandbox was among a slew of measures announced in the 2017-18 budget for promoting FinTech innovation and growth in Australia and establishing the country as a leading global FinTech hub. Other measures include removing double taxation of digital currency. Another step was legislation to implement Crowd Sourced Equity Funding (CSEF) for public companies. The Bill was passed in the Australian Parliament on 22 March 2017, and will commence 29 September 2017. CSEF is a new fundraising approach that allows entrepreneurs to raise funds—up to $5 million per year—from a large number of individuals in return for equity in their company, with lower disclosure costs than traditional public equity offers.
The Australian Investments and Securities Commission (ASIC) introduced a FinTech regulatory sandbox in December 2016, allowing eligible businesses to test certain financial and credit services for up to 12 months without needing to apply for a licence.
The enhanced regulatory sandbox with a 24‑month testing timeframe will further help firms overcome the initial regulatory burden and costs of licensing that may otherwise hinder innovative offerings. The increased timeframe is expected to improve firms' ability to evaluate the commercial viability of new concepts, promoting greater competition and delivering more choice for Australian consumers.
Under the Government's legislative framework, firms can test a wider range of new and innovative FinTech products and services, including:
- providing holistic financial advice in relation to superannuation, life insurance and domestic and international securities;
- issuing and facilitating consumer credit;
- issuing non-cash payment products; and
- providing a crowd-funding service.
The earlier list of eligible products and services can be seen here.
Firms will need to adhere to robust consumer protections and disclosure requirements including responsible lending obligations, best interests duty, and the need for adequate compensation and dispute resolution arrangements.
The exposure drafts and explanatory material are available on the Treasury website. Consultation on the draft legislation (and explanatory memorandum) is open until 3 November 2017, and on the draft regulations (and explanatory statement) until 1 December 2017.
