Markets regulator Sebi on Monday revised the eligibility criteria for the regulatory sandbox. Regulatory sandbox refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain relaxations for the limited purpose of the testing.
The regulator has come out with requirements to apply for the two stages of sandbox testing. The revision has been done in order to enhance the reach and achieve the desired aim, Sebi said in a circular.
It also noted that all Sebi-registered entities are eligible for testing in the regulatory sandbox and added that the entity may apply either on its own or in partnership with any other entity.
"In either scenario, the registered market participant shall be treated as the principal applicant and will be solely responsible for testing of the solution," the release stated.
Examples include biometric ID, alternative credit scoring, e-KYC, blockchain-based remittances, etc.
A per Sebi, in the stage-I testing, the applicant would use a limited and identified set of users for the test. Meanwhile, in stage-II, there will be a larger set of identified users, which will have a cap based on the requirement of the applicant.
An applicant will be eligible for the second phase only after completing a minimum of 90 days in the regulatory sandbox testing. The total duration of the sandbox testing stage (including Stage-I and Stage-II) will be a maximum of 12 months and extendable upon request of the applicant duly approved by the regulator.
"For an applicant to be eligible for stage-II, among others, it has to demonstrate adequate progress, present users feedback and also present the intention and ability to deploy the solution on a broader scale," it further stated. The applicant then proposes an exit strategy for the sandbox.
After the eligibility criteria is satisfied, the applicant must submit the application form in the format prescribed by Sebi. It also gave a detailed application, approval, and evaluation process.
It added that the applicant is also required to submit an exit strategy that would be applicable during successful testing and a withdrawal strategy that would be applicable during unsuccessful testing.
Sebi has also come out with a framework for the submission of test-related information and reports. "At the end of the Stage-II testing period, the permission granted to the applicant as well as the legal and regulatory requirements relaxed by SEBI shall expire," Sebi said.
The regulator has also mentioned the conditions under which approval can be revoked. "To encourage innovation with the minimal regulatory burden, Sebi shall consider exemptions/ relaxations, if any, which could be either in the form of a comprehensive exemption from certain regulatory requirements or selective exemptions on a case-by-case basis, depending on the Innovative solution to be tested," Sebi said.
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No exemptions would be granted from the extant investor protection framework, Know-Your-Customer, and anti-money laundering rules, it further added.
(With inputs from PTI)
(Edited by : Jomy Jos Pullokaran)