In March 2015, ASIC established an Innovation Hub which was designed to assist financial technology (“fintech”) businesses navigate the financial services system. Similarly, ASIC has taken proactive steps to ensure it engages with industry in regard to developments in regulatory technology (“regtech”).
ASIC has defined regtech as “the use of new technologies to solve regulatory and compliance requirements more effectively and efficiently. These technologies could include use of artificial intelligence, natural language processing, data reporting, regulatory codification and big data analysis technologies.”
ASIC has released Report 523 titled ASIC’s Innovation Hub and Our Approach to Regulatory Technology. The report provides an update on ASIC’s Innovation Hub and outlines its approach to fintech and regtech. ASIC is also seeking feedback from interested parties in regard to the approach it is taking in regard to these issues.
The key approach of the Innovation Hub is to engage with fintechs from the concept stage and provide informal assistance for eligible entities. ASIC has provided regulatory guidance with the issuing of the following:
Regulatory Guide 255 - Providing Digital Financial Product Advice to Retail Clients.
Information Sheet 213 - Marketplace Lending (Peer-to-Peer Lending) Products.
Information Sheet 219 - Evaluating Distributed Ledger Technology.
Regulatory Guide 257 - Testing Fintech Products and Services Without Holding an AFS or Credit Licence.
Regulatory Guide 257 specifically covers ASIC’s Regulatory Sandbox framework. This represents a ‘lighter touch’ regulatory environment to enable the testing of innovative business models by:
Providing additional guidance and examples of ASIC exercising its discretion in regard to assessing organisational competence.
Modifying ASIC’s policy for organisational competence in regard to some heavily automated businesses that are limited in scale.
Implementing fintech licensing exemptions to permit eligible businesses to test specified financial services for a 12 month period (subject to certain conditions).
ASIC has confirmed its approach to regtech is guided by the following set of principles:
Working towards outcomes which correlate with ASIC’s strategic priorities and approaches to innovation.
Undertaking focused deliverable initiatives.
Seeking input from industry to properly engage with the rechtech sector.
ASIC has highlighted its current regtech initiatives:
Providing appropriate assistance to regtech businesses via the Innovation Hub.
Ongoing liaison and meetings with stakeholders in the regtech industry to better comprehend the sector.
Conducting regtech trials.
Referring local providers to overseas jurisdictions via cooperation agreements (eg, Memoranda of Understanding).
ASIC has confirmed that it intends to undertake the following courses of action to complement its current regtech activities:
Establishing a new regtech liaison body, comprised of industry bodies, technology firms, consultancies and other entities which will meet every four months to facilitate networking, discuss regtech developments and provide opportunities to collaborate on industry initiatives.
Committing to new trials by using regtech in its supervisory and surveillance work.
Proposing to sponsor a Hackathon (that is, a problem-solving event), in conjunction with industry later this year. Topics may include regulatory reporting, cyber security and promoting positive communication outcomes.
ASIC Report 523 can be found by clicking here
Should you have any queries, please contact Jeremy Danon, director of Ariel & Associates Pty Ltd on (02) 8223 3355 or at jeremy@ariel.associates.