A2ii Newsflash| The SEC Pakistan Issues Regulatory Sandbox Guidelines
The Securities and Exchange Commission of Pakistan (SECP) has in December 2019 issued the SECP Regulatory Sandbox Guidelines, 2019 for all of its regulated sectors, which include insurance, capital markets, the non-banking finance sector and the corporate sector*. Among the parameters that the SECP will scrutinise while screening the applicant for selection in the regulatory sandbox is financial inclusion: “the proposed innovation should promote equal opportunity to access financial services in Pakistan and should increase financial literacy.”
The sandbox’s objective is to reduce regulatory uncertainty so that innovators will be able to experiment with new products, services, processes, and/or business models. Ideas which fall outside of the existing regulatory framework, or where there is considerable uncertainty in terms of unexpected adverse outcomes, are welcome to apply to the SECP regulatory sandbox.
The sandbox is cohort-based, where a set of selected participants will be able to simultaneously live-test their innovations in the sandbox environment for a specified period of time, i.e. six months. SECP will release a call for applications, upon which potential candidates may apply and receive a response within 30 working days on whether they are accepted for preliminary screening. Applicants who undergo the preliminary screening will receive final results within 45 working days. Applications are open to companies registered with the SECP, start-ups and internationally recognised companies or any other persons as deemed appropriate by SECP.
The SECP is optimistic that this will provide an impetus for the development of the financial services industry, including insurance, through the promotion of innovation and digitalisation in Pakistan.
The regulatory sandbox was first pioneered by the UK in 2015. Today, more than 30 countries have operational sandboxes. In the Asia Pacific region, these include Australia, Hong Kong, India, Indonesia, Japan, Kazakhstan, Malaysia, the Philippines, Singapore, Taiwan and Thailand. Among the most recent launches was by India in 2019 – the IRDAI guidelines are available to view here. Elsewhere in the world, Argentina also recently established an InsurTech Innovation Hub.
*All incorporated companies under the Companies Act, 2017, which is the law administered by the SECP. The SECP acts as the corporate registry through its Companies Registration Offices (CROs) in various locations across the country.