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You are here: Home / Investment News / ASIC draws line in sand for fintech

ASIC draws line in sand for fintech

June 12, 2016

John Price: ASIC Commissioner
John Price: ASIC Commissioner

Experimental ‘fintech’ firms across the Tasman would get a regulatory leg-up under proposals floated by the Australian Securities and Investments Commission (ASIC) last week.

The ASIC consultation paper on innovation in the financial services includes a plan to allow certain fintech firms a six-month licence-free period to play.

“We propose to give conditional, industry-wide relief to allow new Australian businesses to test certain financial services for one period of six months without needing to obtain an AFS [Australian Financial Services] licence,” ASIC’s Consultation Paper 260 says. “We refer to this as the ‘regulatory sandbox exemption’.”

However, the exemption would only apply to Australian-domiciled firms that were backed by regulator-approved ‘sponsors’.

“We propose that sandbox sponsors will be not-for-profit industry associations or other Government-recognised entities. The ASIC-approved sponsors would be named in the licensing exemption (and could be updated from time to time),” the consultation paper says.

The ‘sandbox’ proposal is one of five options included in the ASIC paper aimed at fostering innovation in financial services while maintaining regulatory oversight of fintech operators.

ASIC says other options range from the keeping status quo to allowing recognised third-parties to sign-off for smaller fintech operators.

In a statement, ASIC Commissioner, John Price, said: “We believe the measures proposed in this consultation paper will help to lower barriers to entry faced by fintech start-ups by providing cost reductions and promoting efficiency in the provision of financial services whilst maintaining the fundamental principles of the regulatory and licensing framework.”

Last year ASIC also launched an ‘Innovation Hub’ to support Australia’s burgeoning fintech sector.

According to the latest ASIC consultation paper, the Australian regulator received 34 licence applications from “potentially innovative” financial services firms between July 2014 and early in May this year.

Of those 34 applicants, 19 applied for relief under current ASIC rules that allow the regulator to judge fintech managers as competent to operate in financial services even if those businesses may not meet other formal organisational standards.

To date, ASIC has approved 15 of those 19 applications with three still under assessment and one withdrawn.

Despite its growing support for the sector, ASIC says fintech licence applications may not necessarily meet standard processing times. Under ASIC targets, 70 per cent of licences should be processed within 60 days and 90 per cent by 120 days.

“However, our experience has been that businesses with innovative business models frequently lodge novel applications that may take additional time to process,” ASIC says.

The consultation paper notes the UK, US and Singapore have adopted similar fintech-friendly policies.

In New Zealand, the Financial Markets Authority (FMA) has yet to adopt a formal fintech policy. However, NZ was an early adopter of crowd-funding and peer-to-peer lending platforms which are specifically regulated under the Financial Markets Conduct Act and policed by the FMA.

The Ministry of Business, Innovation and Employment is also considering so-called ‘robo-advice’ provisions in the ongoing review of the Financial Advisers Act.

 

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