Today Australia’s Australian Securities and Investments Commission (ASIC) and the UK’s Financial Conduct Authority (FCA) signed a world-first cooperation agreement under which innovative FinTech companies will have more support from financial regulators as they seek to expand their business on a global scale and require additional regulatory permissions.
This agreement follows the creation of Innovation Hubs at the FCA and ASIC in October 2014 and April 2015, respectively. The Innovation Hubs were created to help businesses with innovative ideas navigate financial regulation, support them through the authorisation process and engage with the regulator.
Since its creation the FCA has assisted over 200 businesses and 18 with authorisation, while ASIC has worked with over 75 start-ups and granted 10 licences.
Given that the FinTech industries in the UK and Australia are estimated to generate around $12.5 billion (£6.5 billion) and $1.3 billion (£0.7 billion) in annual revenues and both are growing rapidly, it is a crucial time to help FinTech start-ups stifled by regulation get on with their core operations.
Today ASIC and the FCA have attempted to cement their commitment to encouraging innovation in their jurisdictions by acknowledging that national borders shouldn’t limit innovation in financial services.
As a result of the agreement, the FCA and ASIC will cooperate with each other to operate a referral mechanism and share information.
The FCA and ASIC will refer innovative financial services businesses (Innovator Business) between their respective Innovation Hubs. The referral mechanism will work as follows:
– Businesses would need to meet the referring authority’s criteria (i.e. either the criteria of ASIC or the FCA) for support.
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– After being referred and prior to applying for authorisation to operate in the new market, the receiving authority’s Innovation Hub will offer support to the Innovator Business through helping it understand the regulatory framework in the market it wishes to enter.
– Support will be given during the authorisation process with access to expert staff and where appropriate the implementation of a specialised authorisation process.
– After authorisation, the business will have a dedicated contact to refer to for one year.
– The authorities have advised that Innovator Businesses benefiting from their respective Innovation Hub’s assistance during the pre-authorisation phase may or may not meet the requirements for authorisation.
ASIC and the FCA will share information about innovations where appropriate and this is likely to include information about:
– Emerging market trends and developments; and
– Regulatory issues pertaining to innovation in financial services.
With so much activity from ASIC in the fintech space in the past 48 hours, we are eagerly awaiting the government’s policy announcement that is coming out this week. It might exceed expectations.