Canadian securities regulators announce regulatory sandbox initiative

27 February 2017

Canadian securities regulators have announced a regulatory sandbox initiative with dedicated teams across Canada to help financial technology businesses navigate Canada's securities laws. Canadian securities regulators have indicated that they will work to tailor regulation and oversight of fintech companies to foster innovation, and to reduce regulatory obligations, while ensuring investor protection. The approach is also intended to encourage the introduction of new fintech business models into our capital markets.

Gowling WLG Focus

Through this initiative, Canadian securities regulators are working towards a harmonized approach that should further foster fintech innovation in Canada and allow fintech businesses to remain competitive at home and abroad. This initiative should help address the regulatory compliance challenges many of them encounter.

Summary of Announcement

The new regulatory sandbox is intended to allow fintech businesses to test out new ideas and services, without committing to the time and cost of obtaining full regulatory approval. Business models will be considered on a case-by-case basis and selected businesses may be permitted to test out their businesses in the Canadian marketplace.

The "sandbox" is open to business models that are innovative from the Canadian perspective. Canadian securities regulators have provided the following examples of business models eligible for the regulatory sandbox:

  • online lending and crowdfunding platforms, including angel investor networks or other innovations for securities trading and advising;
  • business models using artificial intelligence for trades or recommendations;
  • cryptocurrency or distributed ledger technology based ventures; and
  • technology service providers to the securities industry.

Canadian securities regulators have described the objective of the initiative as facilitating "the ability of those businesses to use innovative products, services and applications all across Canada, while ensuring appropriate investor protection." They "will consider applications, including for time-limited registrations, on a coordinated and flexible basis to provide a harmonized approach throughout Canada for business models, whether they are start-ups or incumbents."

Gowling WLG will be participating in the 2017 Canadian Crowdfinance Summit, Canada's largest national conference for Canada's rapidly growing internet finance and fintech crowdfunding industry, on March 1, 2017 in Toronto. In particular, Gowling WLG will be moderating a panel of securities regulators from British Columbia, Alberta, Ontario and Quebec where the regulatory sandbox initiative will be discussed.

For more information on the regulatory sandbox initiative or the application process, fintech businesses should contact Jason A. Saltzman, Denis Silva or any other members of our Capital Markets Group.


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