SEBI Board permits use of regulatory sandbox for registered entities

Securities and Exchange Board of India (SEBI) has decided to permit the use of regulatory sandbox. It is a live testing environment system that will allow live testing of new products, services and business models by market players on select customers. This option is available for a specified period time with certain relaxations in the extant SEBI regulations and guidelines.

The decision was taken at SEBI's board meeting held in Mumbai yesterday.

The proposed 'regulatory sandbox' is intended to serve as a testing ground for new business models and technologies that benefit investors, Indian markets and the economy at large.

To begin with, all entities that are registered with SEBI will be eligible for testing within the Regulatory Sandbox and an entity can participate on its own or use the services of a FinTech firm. In this case, the registered entity will be treated as the principal applicant even in the case in which it uses the services of a FinTech firm. It will be responsible for testing of the solution in the sandbox

SEBI has considered the cross-domain approach for Regulatory Sandbox, wherein a regulated entity will be permitted to test solutions for activities for which it is not registered.

Under this framework, the eligible entities will be granted certain facilities and flexibilities to experiment with FinTech solutions in a live environment and on real customers, while ensuring that there are necessary safeguards for investor protection and risk mitigation.