SFC says it expects “great majority” of applicants applying for a corporate licence to go through normal licence application process without need to enter sandbox

SFC says it expects “great majority” of applicants applying for a corporate licence to go through normal licence application process without need to enter sandbox

Hong Kong’s Securities and Futures Commission (SFC) has launched its SFC Regulatory Sandbox to provide a place for firms to test out their ideas.

Like other regulators, the SFC says: “For the sake of market integrity and better investor protection, the reliability of the delivery of such financial services as well as the firms’ internal control systems would need to be examined and monitored in a confined regulatory environment at the initial stage before the services can be expanded and provided to the wider public in Hong Kong.”

Prospective entrants need to meet the SFC’s eligibility and licensing conditions criteria. It doesn’t offer specifics about these, just the usual line that such things should benefit Hong Kong’s financial services industry.

Qualified firms “may be placed under closer monitoring and supervision” by the SFC when they operate in the sandbox. No explanations as to who “may” fall under this.

In addition, qualified firms are expected to have adequate investor protection measures in place. For instance, firms “should notify their clients that they are operating in the sandbox and provide full disclosure of the potential risks and any available compensation arrangements”.

Once a firm has shown that its technology is fit for purpose, it can apply to the SFC for removal or variation of some or all of the licensing conditions imposed.

The SFC says it expects the “great majority” of applicants applying for a corporate licence to go through the normal licence application process without the need to enter the sandbox.

Happy days

Like many regulators, the SFC has been forging ahead with fintech innovation relationships around the world.

Earlier this year, it teamed with the Dubai Financial Services Authority (DFSA); the Australian Securities and Investments Commission (ASIC); and the UK’s Financial Conduct Authority (FCA).

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