The Australian Securities and Investments Commission (ASIC) has released class waivers which will allow eligible financial technology (fintech) businesses to test certain products and services without needing to obtain an Australian financial services licence or credit licence. ASIC has stated that this exemption is unique, with no other major jurisdiction having implemented a class waiver which allows eligible businesses to notify the regulator and commence testing without an individual application process.
The new fintech licensing exemption allows eligible businesses to test specified services for up to 12 months with up to 100 retail clients, provided they meet certain consumer protection conditions and notify ASIC before they commence the business. The exemption is available to services which involve advising on or distributing:
- deposit products, with a maximum $10,000 balance;
- payment products, if ADI-issued with a maximum $10,000 balance;
- general insurance, for personal property and home contents and with a maximum of $50,000 insured;
- liquid investments, for listed Australian securities or simple schemes and with a maximum $10,000 exposure; and
- consumer credit contracts with certain features, and a loan size between $2,001 and $25,000.
ASIC has also released Regulatory Guide 247 which contains information regarding the fintech exemption, and Australia’s ‘regulatory sandbox’ framework, which allows for fintech products or services to be tested without a licence. The framework has three components:
- existing flexibility in the regulatory framework or exemptions provided by law which mean that a licence is not required;
- ASIC’s new ‘fintech licensing exemption’ which is provided under ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 and ASIC Credit (Concept Validation Licensing Exemption) Instrument 2016/1176; or
- tailored, individual licensing exemptions granted by ASIC to facilitate product or service testing.
This means that businesses which are not eligible for the fintech licensing exemption (or any other exemption) may be able to seek an individual exemption.