UK and Australian regulators sign deal to support fintech authorisations

Out-Law News | 23 Mar 2016 | 5:10 pm | 2 min. read

UK financial technology businesses should find it easier to enter the Australian market after a new framework of mutual cooperation, referral and recognition was agreed by UK and Australian regulators.

The framework, which will also support financial technology companies licensed in Australia to win authorisation in the UK market, supports closer links between the Innovation Hubs already established by the Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC).

According to the agreement (7-page / 257KB PDF) signed by the FCA and ASIC, the two regulators will "through their Innovation Hubs … refer to one another those innovator businesses who would like to enter the others' market". The written referrals will "include information demonstrating that the innovator business ... meets, or would meet, the referring authority's criteria for support".

"To qualify for the support offered by the agreement, innovator businesses will need to meet the eligibility criteria of their home regulator’s Innovation Hub," a joint statement issued by the FCA and ASIC said. "Once referred by the regulator, and ahead of applying for authorisation to operate in the new market, the business will have access to a dedicated team or contact person who will help them to understand the regulatory framework in the market they wish to join, and how it applies to them."

"These businesses will be given help during the authorisation processes with access to expert staff and, where appropriate, the implementation of a specialised authorisation process. Following authorisation, the businesses will have a dedicated contact to turn to for a year," they said.

Financial services and technology law expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com, said that greater collaboration with ASIC and other regulators could help the FCA more effectively manage its resources.

"There is a lot of discussion at the moment around constraints on the FCA's resources," Scanlon said. "There is a suggestion that the FCA might have a role to play in overseeing a framework of governance around the Treasury's open data APIs initiative when it develops further. This would place further demands on FCA resources."

"This agreement with ASIC will hopefully make the decision-making processes of both regulators more effective as the FCA and ASIC will be able to gain significant insight from each other on how they are approaching similar types of innovations under similar regulatory frameworks. It is to be hoped that the knowledge sharing achieved through this agreement can be leveraged in respect of other initiatives, such as regtech," he said.

In their joint statement the FCA and ASIC described their deal as a "world-first agreement". They said that the FCA has supported more than 200 businesses via its Innovation Hub since it launched in October 2014 and that 18 companies have so far gone on to obtain authorisation to operate in the UK market. The ASIC Innovation Hub launched in April 2015. To-date the regulator has supported more than 75 start-up businesses and 10 licences have been granted.

Christopher Woolard, director of strategy and competition at the FCA, said: "Innovation in financial services isn’t limited by national borders and so it’s important that we support overseas businesses that have new ideas that could benefit British consumers. We also know that many British firms wish to use the UK as a springboard to launch their businesses or products internationally, making them potentially more sustainable challengers. That is why this agreement – the first of many, we hope – is important."

"With ASIC, we will reduce the barriers for authorised firms looking to grow to scale overseas and to assist non-UK innovators interested in entering the market we oversee," he said.

Greg Medcraft, chairman of ASIC, said the regulator is "committed to encouraging innovation that has the potential to benefit financial consumers and investors".

"Since ASIC launched its Innovation Hub last year we have seen a surge in requests by fintech startups seeking assistance about how to navigate the regulatory requirements," Medcraft said. "In particular we have dealt with robo or digital advice, crowd sourced equity funding, payments, marketplace lending and blockchain business models. It is very exciting to observe and clearly some business ideas will want to scale up internationally. We believe this agreement with the FCA will help break down barriers to entry both here and in the UK."