Quick Take: The Securities Commission issues Guidelines on Regulatory Sandbox
19 February 2025
Following from the announcement by its Chairman, Dato’ Mohammad Faiz Azmi, at the SCxSC Fintech Summit in early October 2024
1, the Securities Commission Malaysia (“
SC”) launched the
Guidelines on Regulatory Sandbox (“
Guidelines”) on 17 February 2025.
The Guidelines seek to establish a framework for the Regulatory Sandbox for testing of innovative capital market products and services, and set out the requirements that have to be complied with for admission into and continued participation in the said sandbox.
This Alert provides a quick take on the Guidelines and related matters.
Objectives
The objectives of the Regulatory Sandbox framework:
- Facilitate the offering of eligible innovative capital market products and services.
- Provide a controlled environment to test proposals with appropriate safeguards to protect investors.
Eligibility criteria
The eligibility criteria for participation in the Regulatory Sandbox include:
- The applicant must be a corporation registered by the SC to participate in the Regulatory Sandbox.
- The applicant’s directors, controller and senior management are fit and proper2.
- The proposed capital market product or service must be innovative in that it is not currently available3 in the Malaysian capital market.
- The proposed capital market product or service facilitates innovation or provides a meaningful value proposition to the Malaysian capital market.
- The applicant has clear and well defined testing plans and parameters including plans for upscaling and an orderly exit.
- The applicant must demonstrate readiness to offer the proposed capital market product or service on a commercial scale upon successful testing.
- The applicant has identified the regulatory requirements or gaps that pose regulatory challenges in relation to the proposed offering of the capital market product or service.
- The applicant is able to manage risks associated with its business and operations, including having adequate controls, policies and procedures, and a plan for orderly winding down of the business or ceasing the offering of the capital market product or service.
According to the SC, products and solutions that focus on financial inclusiveness, Islamic finance or retirement solutions are strongly encouraged.
4
Pre-consultation
Interested parties must participate in a pre-consultation session with the SC before submitting an application for admission to the Regulatory Sandbox.
Application details
According to the Regulatory Sandbox Application Guide issued by the SC:
- Applications to participate in the Regulatory Sandbox will be open from 15 April 2025 until 31 May 2025.
- Applicants will be notified within 30 working days of submission of their applications if they have progressed to the evaluation stage.
- The evaluation stage is estimated to take two months after which successful candidates will be informed of their admittance into the Regulatory Sandbox.
- The testing period for the proposed capital market product or service will be 12 months, or such duration as approved by the SC.
The assessment and evaluation periods referred to in items 2 and 3 above may be extended depending on the complexity of a proposal.
Applications are to be submitted using the application form available on line.
A brief write-up on the Regulatory Sandbox by the SC, the Regulatory Sandbox Application Guide and Application Form can be accessed
here,
here and
here. respectively.
Comments
The provision of a testbed for innovative capital market products and services is a welcomed initiative which could lead to greater width and depth of the Malaysian capital market through the introduction of new products and services that are hitherto not available in our capital market.
Alert by Lee Ai Hsian (Partner) of the Fintech Practice of Skrine.
1 Our Alert on the SC Chairman’s announcement can be accessed
here.
2 The fit and proper criteria for an individual is set out in Appendix 1 of the Guidelines.
3 A capital market product or service is “
not currently available in Malaysia” if it has
never been offered in Malaysia by reason that there is no existing regulatory framework for the offering of such capital market product or service.
4 The SC’s media release dated 17 February 2025 can be accessed
here.
This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.