SEBI: Sebi issues guidelines for inter-operable regulatory sandbox – Blue Barrows

Financial service providers would be able to launch hybrid products that have features of deposits, capital markets, insurance and pension.

The Securities and Exchange Board of India on Wednesday came out with a standard operating procedure for inter- operable regulatory sandbox.

The move is aimed to facilitate testing of innovative hybrid financial products and services falling within the regulatory ambit of more than one financial sector regulator.

“The Inter-Regulatory Technical Group on FinTech (IRTG on FinTech) has been constituted under the

of Sub-Committee of the Financial Stability and Development Council (FSDC- SC) for inter-regulatory co-ordination among the financial sector regulators on FinTech-related issues including Inter-operable Regulatory Sandbox (IoRS). The Group is chaired by Chief General Manager of the FinTech Department, RBI with representation from other financial sector regulators, viz., SEBI, IRDAI, IFSCA and PFRDA and one representative each from DEA and MeITY,” Sebi said.

FinTech department of RBI would act as nodal point for receiving applications under IoRS.

The application for IoRS shall be on ‘on tap basis’. The RS (regulatory sandbox)framework of the regulator under whose remit the dominant feature of the product falls, would govern it as principal regulator(PR).

The regulators under whose remit the other features apart from the dominant feature of the product fall would be the associate regulator (AR).

Two sets of factors would be considered on deciding the dominant feature. Firstly, the type of enhancement to the existing products like loans, deposits, capital market instruments, insurance, G-sec instruments and pension products. And secondly, the number of relaxations sought by the entity for undertaking the test under the IoRS.

The dominant feature would be decided with greater weightage to the number of relaxations sought. The relaxation, if warranted, would be considered by the principal and associate regulator on case-to-case basis and decision to that effect would be binding and final.

The test design would be finalised by the principal regulator in consultation with the associate regulator.

“Any co-ordination issue between PR and AR to reach common views on the regulatory treatment of innovative products, services and business models shall be discussed and sorted out in the IRTG on FinTech before initiation of the live testing under IoRS,” the press release said.

Post successful exit from the IoRS, the entity should approach the principal and associate regulators, for authorisation and for seeking regulatory dispensation before launching the product in the market. The decision of respective regulator would be binding on the entity.