The Securities and Futures Commission Regulatory Sandbox

The Securities and Futures Commission (“SFC”) issued a circular on 29 September 2017 announcing the launch of the SFC Regulatory Sandbox (“Sandbox”) to provide a confined regulatory environment for qualified firms to operate regulated activities under the Securities and Futures Ordinance (“SFO”) before Fintech is fully used.

The features of the Sandbox are as follows:

1.     Eligibility

The Sandbox is available to licensed corporations and start-up firms that intend to carry on a regulated activity under the SFO. The qualified firm must be fit and proper, utilise innovative technologies and be able to demonstrate a genuine and serious commitment to carry on regulated activities through the use of Fintech.

2.     Licensing conditions

To minimise risks to investors, the SFC may impose licensing conditions.

3.     Closer monitoring and supervision

Qualified firms may be placed under closer monitoring and supervision by the SFC.

4.     Investor protection measures

Qualified firms are expected to have adequate investor protection measures in place to address actual or potential risks or concerns identified.

5.     Exit

Once a qualified firm has demonstrated that its technology is reliable and fit for purpose, and its internal control procedures have adequately addressed the risks identified, the firm may apply for removal or variation of some or all of the licensing conditions.