The Australian Securities and Investments Commission (ASIC) has published guidance and other material in relation to the Enhanced Regulatory Sandbox (ERS) for innovative financial services businesses. The guidance was released on 25 August 2020.
The ERS expands on the Sandbox and allows for a longer testing period of up to 24 months for a broader range of financial services and credit activities and for a wider range of businesses, including existing licensees.
In summary, the key changes to the Sandbox include the following:
- Eligibility criteria: Applicants will need to satisfy two new tests – the net public benefit test and the innovation test, summarised below:
- Net public benefit test: An applicant must adequately explain why exempting each eligible financial service, financial product or credit activity will result, or be likely to result, in a benefit to the public. The benefit must outweigh any detriment to the public that will result, or be likely to result, from exempting that service.
- Innovation test: An applicant must adequately explain why each eligible financial service, financial product or credit activity is considered either new or a new adaptation or improvement of another service.
- Timeframe: An increase in the timeframe for testing from 12 months to 24 months. If an applicant is able to rely on the ERS exemption, the exemption period commences on the 31st day after the applicant lodges the notification with ASIC (if ASIC has not corresponded with you in the 30 day period form lodgement). The exemption period cannot be extended, paused or reset.
- Number of clients: The maximum number of wholesale clients that the financial services can be provided to remains unlimited. The maximum number of retail clients that the financial services can be provided to increases from 100 clients to an unlimited number of clients.
- Use of sandbox: Under the superseded Sandbox, a business could only use a regulatory sandbox once. Following the changes, a business can use the ERS to test a particular financial service or credit activity only once, however, the business can use the sandbox multiple times to test different services and activities for which they have not already tested.
- Financial services: The ERS broadens the range of financial services for market testing for both wholesale and retail clients (detailed in the table below).
Source: Hall & Wilcox article