Financial Services (Regulatory Sandbox) Regulations, 2020

Summary

These Regulations establish a Regulatory Sandbox framework operated by the BVI Financial Services Commission, allowing firms testing innovative FinTech products or services to be temporarily exempted from otherwise applicable regulatory legislation while participating in a controlled testing environment. They set out the application and approval process, ongoing obligations of approved participants, and the Commission's powers to revoke approval.

• Who can apply: BVI business companies, foreign companies, limited partnerships, micro business companies, licensees, and any other person the Commission approves, provided they are proposing to engage or are engaged in innovative FinTech.
• Application requirements: Applicants must submit a detailed business proposal, test scenarios, risk framework, resourcing information, maximum client numbers, exit strategies, and pay the applicable fee; any change to this information must be notified to the Commission immediately.
• Approval effect: Approved Sandbox participants are exempt from the relevant regulatory legislation while testing within the sandbox, for a period the Commission specifies (maximum 18 months, extendable by up to 6 months).
• Ongoing obligations: Participants must maintain minimum governance (e.g. at least 2 directors/partners or a senior manager), stay within approved client limits, identify and manage risks including money laundering and terrorist financing risks, and disclose sandbox status and risks to clients.
• Reporting: Participants must file interim reports at intervals set by the Commission and a final report within 30 days of the end of testing, both signed by the chief executive officer, and must keep proper records throughout.
• Exiting or revocation: A participant wishing to become licensed must give at least 60 days' notice before exiting the sandbox; if approval is revoked, the participant must stop taking new clients immediately and complete its exit strategy within 30 days (extendable by a further 30 days in appropriate cases).

The Regulations came into force on a date to be fixed by Ministerial Order published in the Gazette, so the operative commencement date is not stated in the text itself. Fees payable are those set out in the Financial Services (Fees) Regulations, 2010.

Key obligations

• Submit a complete application (business proposal, test scenarios, risk framework, resources, exit strategies, maximum client number, fee) to be approved as a Sandbox participant
• Notify the Commission immediately in writing of any change to the information provided in the application
• Not modify an approved business proposal during testing without first obtaining the Commission's approval
• Participate in and test within the Regulatory Sandbox for no more than 18 months from the specified commencement date, unless an extension of up to 6 months is granted
• Apply for any extension at least 30 days before the end of the specified testing period, stating reasons and additional time needed
• Give the Commission at least 60 days' written notice before exiting the sandbox if intending to apply for a licence under regulatory legislation
• Maintain at all times at least 2 individual directors (BVI business company), 2 individual partners (limited partnership), or one senior individual manager (other cases)
• Not exceed the maximum number of clients approved by the Commission
• Notify the Commission immediately of any unforeseen matter or change in circumstances materially affecting risk profile or obligations
• Take adequate measures to identify and manage risks, including money laundering, terrorist financing and proliferation financing risks
• File interim reports at intervals determined by the Commission covering compliance, clients, risks, complaints and financial position
• Submit a final report to the Commission within 30 days after the end of the testing period
• Maintain proper and clear records throughout the testing period
• Have interim and final reports confirmed by signature of the chief executive officer (or each CEO in joint testing)
• Disclose sandbox-related risks and status to clients or potential clients at the time of soliciting them
• Pay the fees set out in the Financial Services (Fees) Regulations, 2010
• On revocation of approval, immediately cease taking new clients, invoke exit strategy within 30 days (or 30-day extension if granted), and notify clients of the revocation
• Comply with any guidelines issued by the Commission in relation to these Regulations

Applies to

BVI business companies, foreign companies, limited partnerships, micro business companies, licensees, Sandbox participants, applicants for Sandbox participation

Deadlines

• such date as the Minister may by Order published in the Gazette determine: Commencement of the Regulations
• not exceeding 18 months from the date specified by the Commission: Maximum initial period a Sandbox participant may test within the Regulatory Sandbox
• at least 30 days before the end of the testing period: Deadline for a Sandbox participant to apply for an extension of testing time
• not exceeding 6 months: Maximum additional extension period the Commission may grant
• at least 60 days before exiting the Regulatory Sandbox: Notice a participant must give the Commission if wishing to apply for a licence under regulatory legislation
• within 30 days after the end of the testing period: Deadline to submit the final report to the Commission
• not exceeding 30 days from the date of revocation (extendable by a further 30 days): Period within which a participant whose approval is revoked must cease new clients and complete its exit strategy

Related documents

• Financial Services (Fees) (Amendment) Regulations, 2020 commences this document
• Financial Services (Regulatory Sandbox) Order, 2020 (S.I. No. 97 of 2020) commences this document