JOHN PRICE Commissioner, ASIC MARK ADAMS Senior Executive Leader, Strategic Intelligence and Co-Ordinator, Innovation Hub ASIC ASIC’S REGULATORY SANDBOX EXEMPTION PROPOSAL AN EXPLANATION Wednesday 8 June 2016

Outline Part 1: Setting the scene – John Price ASIC’s objectives and Innovation Hub Existing flexible framework Fintech start-up issues The facilitative proposals – overview and rationale Part 2: The Regulatory Sandbox Proposal – Mark Adams The facilitative proposals – in detail International comparison Part 3: Questions & Answers

ASIC’s strategic objectives Promote confident and informed financial consumers and investors Promote fair, orderly, transparent and efficient financial markets

ASIC’s Innovation Hub and approach The Hub is assisting fintech start-ups to navigate the our regulatory system Consistent with cutting red-tape ASIC will not compromise fundamental principles of regulation and licensing

Current flexible framework Modular licensing frameworks Option to operate as a representative Assessment of organisational competence – ASIC discretion Waivers and no-action policy and exemptions

Fintech start-up issues – Barriers Speed to market Organisation competence Access to capital

Balancing act Promoting consumer and investor outcomes Promoting market efficiency

Measures proposed - overview Additional guidance – organisational competence Limited licence – alternative organisational competence Limited licensing exemption (the ‘regulatory sandbox’ exemption)

The balance Additional flexibility and guidance Limit activities with consumer outcomes conditions » Satisfy the fundamental principles of regulation and licensing in alternative ways

Additional guidance - Competence ASIC’s existing discretion – organisational competence Application of discretion in practice Proposed examples: Nature of financial services Nature of financial products Knowledge & skills

Limited licence – automated services Propose alternative – Organisational competence Automated business models ‘Professional’ third party compliance sign-off Timing of sign-off Nature of sign-off

The ‘regulatory sandbox’ exemption Available for new Australian financial service businesses Six months duration Limited financial services only Consumer protection - conditions on the exemption

The ‘regulatory sandbox’ exemption – Conditions Advice or dealing service Liquid products Client and investment caps Adequate compensation arrangements External dispute resolution arrangements Core conduct and disclosure obligations Sandbox ‘sponsorship’ Notification and report requirements

International Comparison United Kingdom – framework in place: ‘regulatory sandbox’ (entity specific limited licence) United States – ‘No-action’ approach Singapore – ‘regulatory sandbox’ proposal to be issued

Submissions: Consultation Paper 260 Closing date for submissions is 22 July 2016

Questions? Web: business/innovation-hub/