On February 23, 2017, the Canadian Securities Administrators (CSA), the umbrella organization of Canada’s provincial and territorial securities regulators, launched a regulatory sandbox initiative to support businesses seeking to offer innovative products, services and applications including:
- online platforms, including crowdfunding portals, online lenders, angel investor networks or other technological 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, such as non-client facing risk and compliance support services (also known as regulatory technology or regtech).
The CSA stated that 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.
The sandbox is open to business models that are truly innovative from a Canadian market perspective. The CSA intend to assess the merits of each business model, on a case-by-case basis, and businesses that register or receive relief could be permitted to test their products and services throughout the Canadian market.
To apply to the CSA regulatory sandbox, businesses should contact their local securities regulator, which will consider the eligibility of their business model and refer it to the CSA regulatory sandbox if it provides genuine technological innovation in the securities industry. As part of the application process, CSA Staff may request live environment testing, a business plan and demonstration of potential investor benefits (as well as how investor risks are minimized).
The CSA advised that local securities regulators can also provide early stage guidance on the application of current securities regulatory obligations, as well as information and support.