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Australia to get a bigger sandbox

May 26 2017

As part of the Federal Budget 2017-18 released on May 9 the Australian Government announced plans to enhance the regulatory sandbox established by the Australian Securities and Investment Commission (ASIC) last year.

The proposal includes expanding the types of products and services that will be eligible to be tested and extending the testing timeframe from 12 months to 24 months.

Currently sandbox participants can provide financial product advice about, and assist clients to trade in, lower risk financial products such as listed Australian securities, simple managed funds and deposit products. Accordingly, participation in the sandbox is typically limited to intermediary type businesses (eg robo-advisers). ASIC specifically excluded issuing financial products and lending from the sandbox to ensure that consumers received all the usual protections from the issuers. However, the Government proposes to expand the types of financial services and products that are allowed to be tested. Under the proposal, businesses will be able to:

provide “holistic” financial product advice (presumably on a wider range of financial products);
lend to consumers; and
issue short term deposit or payments products (it is unclear what is meant by short term deposit products and how this will interact with the Australian Prudential Regulation Authority oversight usually required for some products of this kind).

U.S. CFTC launches LabCFTC to promote FinTech innovation

May 21 2017

By Anthony Nolan and Eric A. Love

On May 17, the U.S. Commodity Futures Trading Commission (CFTC) announced that it voted to unanimously to approve the creation of LabCFTC, a New York-based initiative that is designed to try to encourage innovation in the Fintech industry and enhance the “quality, resiliency, and competiveness” of the commodity futures and swaps markets. LabCFTC will also seek to identify and use FinTech and RegTech solutions that can position the CFTC to more effectively and efficiently fulfill its regulatory responsibilities in increasingly digital financial markets.

LabCFTC consists of GuidePoint, a point of contact at the CFTC for FinTech industry participants that will facilitate greater engagement on the agency’s regulatory regime, as well as on new technologies in the marketplace. GuidePoint will also allow FinTech innovators to obtain guidance about the applicability of CFTC regulations to proposed industry innovations. In addition, LabCFTC consists of CFTC 2.0, an initiative that will focus on utilizing new technologies to improve the CFTC’s operations.

Asia-Pacific regulatory trends

May 19 2017

By Jim Bulling

Jim Bulling contributed an article to American Lawyer on regulatory trends in the Asia-Pacific region. The article contains a high level review of some of the policies and regulatory settings that countries in the region have adopted in response to the development of the FinTech industry. In particular the article looks at some of the regulatory settings which Governments have put in place to encourage a local FinTech industry and to protect consumers and the local financial system.

To read the article, click here.

Proprietary companies to be able to access crowd sourced funding

May 18 2017

By Jim Bulling and Rania Seoud

On 9 May 2017, the Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 (Bill) was released for public consultation. If passed into law, the Bill will allow proprietary companies that meet eligibility requirements to access crowd-sourced funding (CSF).

As detailed in a recent blog post on the FinTech Law Watch, CSF will become available in Australia on 28 September 2017 due to the Corporations Amendment (Crowd Sourced Funding) 2016 (Cth) (Act). However, the Act limits the availability of crowd-sourced funding to public unlisted companies.

Dubai International Financial Centre’s FinTech Hive accelerator opens

May 18 2017

By Jonathan Lawrence

The Dubai International Financial Centre (DIFC) has formally opened its call for applicants to its ‘FinTech Hive at DIFC’ accelerator programme, following registered interest from over 200 companies since its launch in January 2017. The 12-week programme is aiming to help early and growth-stage FinTech companies accelerate product and business development by gaining exposure to help from financial institution executives. Successful applicants will be offered the opportunity to develop, test and modify their innovations in collaboration with senior representatives from DIFC Authority, Accenture, and financial institutions such as Citi, HSBC, Standard Chartered, Visa, Emirates NBD, and Mashreq.

The programme also aims to provide access to mentorship from technology partners such as Facebook and Envestnet | Yodlee. Facebook will run an independent mentorship workshop for startups, providing advice on monetisation, growth and engagement, development and marketing tools, and analytics. Envestnet | Yodlee will provide developers with access to Application Program Interfaces (APIs) to build innovative financial applications and services.

The changing nature of payments in the US and UK

May 11 2017

By Judith Rinearson

Rarely does a FinTech lawyer have the opportunity to experience payments regulations in two very different locations. US K&L Gates Partner, Judith Rinearson, had the opportunity to do just that when she spent 20 months in London working as a payments regulatory lawyer. Her insightful commentary on the two different approaches to payments regulations was recently published in the UK’s Law 360.

To read the article, click here.

Surge in fintech patent applications

May 05 2017

By Alistair Mann and Steven Wulff

Several business publications have recently reported a dramatic increase in the number of patent applications filed globally for fintech-related inventions. According to one widely-reported analysis, 9,545 applications were filed in 2016 which is 500 more than in 2015 and over 49% more than in 2011. The United States is reportedly leading the charge with 4,523 patent filings in 2016 and China, in a somewhat distant second place, filed about half that number in the same year.

A patent gives an inventor exclusive rights to exploit their invention commercially for a limited term (usually 20 years) in return for public disclosure of the invention. The monopoly conferred serves to incentivize innovation and encourages public disclosure of innovations for the advancement of technology and the common good. The recent surge in patent applications clearly reflects a significant uptick in research and development efforts in fintech and shows that innovators in this space are serious about protecting and commercialising the fruits of their labour.

The types of fintech-related inventions seeking to be patented are diverse and include systems for managing bitcoin and blockchain-based currency reserves. Other examples include credit risk assessment tools and artificial intelligence agents for identifying and analysing fraud and irregular trading activities.

K&L Gates has significant experience filing fintech-related patents including for SMEs and large entities in Australia and the United States. Innovators should consider patenting their new fintech technologies to help protect their competitive advantage and reward their R&D efforts.

ASIC signs fintech Cooperation Agreement with Indonesia

May 05 2017

By Claire de Koeyer and Jim Bulling

The Australian Securities Investment Commission (ASIC) has entered into a Cooperation Agreement (Agreement) with Indonesia’s financial services sector regulator Otoritas Jasa Keuangan (OJK) which focuses on promoting innovation in financial services in their respective markets.

The Agreement establishes a framework for cooperation between ASIC and OJK in the expanding space of financial services innovation, including an agreement to share information on emerging market trends and regulatory issues arising from the growth in innovation.

Voice biometrics and fraud prevention in payments

May 05 2017

By Claire de Koeyer and Jim Bulling

The ability to transfer funds from one account to another in near real-time using just an email address or mobile number is getting closer for Australians with the RBA advising that developments are on track to allow the first payments to be made through a new payment platform towards the end of 2017. The new platform, the development of which was commenced by the RBA in 2012, allows for near real-time funds transfer between bank accounts, regardless of who people bank with.

K&L Gates hosts FinTech event in Perth

May 03 2017

By Adam Levine and Ben Kiernan-Green

On 19 April 2017 the K&L Gates Perth office hosted a Perth FinTech Meetup, chaired by ASIC Commissioner John Price. The event provided clients, lawyers and members of the FinTech and crowd-funding communities an opportunity to hear about ASIC’s involvement and commitment to the development of the ASIC Innovation Hub, ASIC’s regulatory sandbox and RegTech.

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