The CSA Regulatory Sandbox is an initiative of the Canadian Securities Administrators (CSA) to support fintech businesses seeking to offer innovative products, services and applications in Canada. It allows firms to register and/or obtain exemptive relief from securities laws requirements, under a faster and more flexible process than through a standard application, in order to test their products, services and applications throughout the Canadian market on a time limited basis.
The CSA Regulatory Sandbox is part of the CSA’s 2016-2019 Business Plan to gain a better understanding of how technology innovations are impacting capital markets, assess the scope and nature of regulatory implications and what may be required to modernize the securities regulatory framework for fintechs.
The CSA Regulatory Sandbox is open to business models that are innovative from a Canadian market perspective. Applicants can range from start-ups to well established companies. Firms that want to apply should be ready to provide live environment testing, a business plan and a discussion of potential investor benefits (including how it will minimize investor risks).
Firms that do not meet these criteria can still apply to register or obtain relief through the standard application process.
Firms with innovative business models are invited to contact their local securities regulator to discuss the firm’s business model and applicable securities law issues. The firm’s local securities regulator will analyze each business model, on a case-by-case basis.
Below is a summary of the process.
The firm presents its business model to its local securities regulator’s staff. Staff will analyze the business model and ask questions. Staff will work with the firm to identify the regulatory requirements for which registration and/or exemptive relief may be needed. Staff and the firm may also discuss the firm’s eligibility to participate in the CSA Regulatory Sandbox, including limits and conditions that could be imposed.
The firm files an application with its local securities regulator to register and/or obtain exemptive relief from regulatory requirements. Although filed with its local securities regulator, the application can be made under the passport regime, giving the firm access to capital markets in multiple jurisdictions. Staff of the firm’s local securities regulator may provide assistance to the firm or its advisers, as applicable, to guide the firm and its counsel for preparing the application
CSA staff reviews the application on an expedited basis.
CSA staff determines the limits and conditions that will apply to the firm in the CSA Regulatory Sandbox.
If the firm agrees to the tailored program, it will receive authorization to operate for a given period in the CSA Regulatory Sandbox, subject to the limits and conditions imposed on its registration and/or exemptive relief.
The CSA considers implementing changes to the securities regulatory framework as needed by the advancement of new and innovative technologies. As the pace of innovation in the financial sector accelerates, the CSA Regulatory Sandbox allows firms to obtain exemptive relief from the requirements that may be an impediment to their innovative business models, provided that investor protection is not compromised. The conditions of registration for firms participating in the sandbox are also tailored in the same fashion.
Consequently, firms authorized to operate in the sandbox remain subject to all applicable regulatory requirements that may apply, subject to any exemptive relief granted.
Registration and exemptive relief granted to firms in the CSA Regulatory Sandbox will be time limited. The time limit will be determined on a case-by-case basis. Other limits and conditions can be imposed to protect investors, including compliance and reporting obligations.
Firms that intend to operate in the CSA Regulatory Sandbox should be prepared to provide CSA staff with data on their operations for monitoring and data collection purposes. Firms remain subject to CSA compliance reviews and surveillance.
Is the CSA Regulatory Sandbox only for fintech start-ups? Is it open to incumbents, such as dealers and financial institutions?
The CSA Regulatory Sandbox is open to all firms with innovative business models, whether start-ups or incumbents. For example, a firm that is currently registered or a large financial institution subject to securities law requirements that has developed an innovative business model would be eligible to apply.
Will firms in the CSA Regulatory Sandbox operate in an unregulated environment?
No. Firms authorized to operate in the sandbox remain subject to all applicable regulatory requirements, subject to any exemptive relief granted.
Who should firms contact to obtain information or apply to the CSA Regulatory Sandbox?
A firm should contact the securities regulator in the jurisdiction where its head office is located. Dedicated staff is available for fintechs seeking assistance to navigate the securities regulatory environment.
Where can I find the name of the firms have been authorized in the CSA Regulatory Sandbox?
Click here for a list of the decisions granted through the CSA Regulatory Sandbox.
Can the CSA Regulatory Sandbox confirm that securities law requirements do not apply to my business model?
As securities regulators, the CSA can provide you with general information on securities law requirements, but cannot provide legal opinion or advice on a firm’s specific situation. A firm should rely on its legal advisers to make this determination.