16.03 2017

ASIC’s support for ‘fintech’ products and services

As the world moves to enhance technologies encouragingly, so too do our regulators. Recently, ASIC has shown particular interest towards financial technology (fintech) products and services and has shown its support for the entities wishing to test them.

Last year (2016), saw ASIC introduce two new legislative instruments which operate to exempt fintech companies with eligible products or services from the requirement to hold an Australian Financial Services License (AFSL) for the first 12 months of their operation.

Eligible products are limited to only a few products and services, including those in relation to listed or quoted securities, deposit products, some kinds of general insurance products and others. However, ASIC does plan on reviewing (and potentially broadening) the scope of the legislative instruments within 12 to 18 months of their operation.

Although ASIC is providing a more accessible and expedited path to the markets for some fintech companies, persons who are developing technologies that may fall within the realm of AFSL requirements need to ensure that they either obtain an AFSL or notify ASIC that they fall within an exemption before they begin testing their products or services.

With new and innovative technology comes a blur in the application of requirements for AFSL’s, and likewise the application of the new exemptions. More technology companies are developing software and tools that cover a number of different services in one umbrella or set of software. The question of whether a product or service falls within the meaning of ‘financial service’ for the purposes of the Corporations Act 2001 (Cth) is not necessarily clear. Regardless of the overarching purpose of the product or service, the requirement to hold an AFSL may arise as a result of an aspect of the product or service falling within AFSL territory.

For example, a company may develop software that uses an algorithm that considers a number of different factors (many of which are not finance related). However, if the result of the algorithm is something which is intended to, or even may be regarded as being intended to influence a person to make a decision about a financial product (such as purchasing shares, making a deal or investing in a company), then the realm of AFSL requirements may become relevant.

Circumstances will vary and there are cases where an AFSL is not in fact required. However, each case needs to be carefully analysed on its merits. Companies should consult their legal advisors before testing their new products and should not rely on the ASIC exemption unless it is clear that they fall within its scope.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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