The Australian Securities and Investment Commission’s (ASIC) regulatory sandbox is up and running exempting qualifying businesses from holding an Australian financial services licence or Australian credit licence. There are a number of reasons why a business may not be eligible including:

• the business will issue the financial products;

• it is likely that there will be more than 100 retail clients

• it is likely that the value of the financial products will be more than $5 million;

• 12 months testing will not be sufficient; or

• the financial products the business deals with fall outside the eligible products for the sandbox which are:

  • simple managed investment schemes;

  • non-cash payment systems issued by a bank;

  • listed securities;

  • government bonds; and

  • unsecured loans.

So what are your options if you don’t meet all the eligibility criteria but don’t want to obtain your own licence?

• Provide a product that does not require a licence. For example, credit contracts for commercial purposes do not require a licence.

• Rely on one of the many licensing exemptions already available. For example, there is a licensing exemption for issuing low value non-cash payment products.

• You can become an authorised representative of a licensee. Authorised representatives provide financial services under the supervision of a licensee and on terms agreed with the licensee.

• If you want to issue financial products you may consider obtaining an ‘intermediary authorisation’ from an Australian financial services licensee which is authorised to issue the product.

• Apply to ASIC for individual relief from licensing. This is similar to the approach other jurisdictions, such as the UK, have taken for their regulatory sandboxes and will allow you to create your own sandbox.