The Securities and Exchange Commission has announced a new “sandbox” regulatory regime aimed at encouraging the introduction of innovative new products for use in Ghana’s capital markets. Expectedly most of the new innovations will involve the use of technology to deliver products and services which means the new sand box regime is aimed primarily at financial technology firms. Instructively, since the Bank of Ghana began licensing fintechs (as they are popularly known) who want to design financial products either by themselves or in collaboration with financial intermediation companies such as banks, about 70 license applications have been sent to the central bank. A sandbox regime allows for the testing of a potential new product or service for an agreed limited time duration and covering an agreed limited target market. The idea is that this is the best way to discover whether a proposed new product or service can actually work as expected and it also enables the promoters, in collaboration with the regulator to iron out any wrinkles identified with regards to the product or service before it is offered to the market as a whole.
Under the new regulations SEC will begin issuing Regulatory Sandbox Licenses to companies deemed to deserve them. Depending on the capital market service or the provisions of support to the capital market service provider to be tested, the applicant involved and the application made, SEC will determine the specific legal and regulatory requirements which it is prepared to relax in each case.
I each case the duration of the testing period will be agreed although extensions may be granted where necessary. At the end SEC will determine whether the product or service can be offered to the entire market, although the Commission under certain circumstances retains the right to abrogate the testing mid-way.
The new sand box regime is expected to accelerate the design and introduction of a host of new capital market products and services by opening the door to private sector enterprises. For instance SEC has been considering the introduction of forward contracts for securities trading for years. With the new regime, fintechs, in collaboration with licensed securities traders will have the chance to come up with workable models and frameworks.
Indeed capital market analysts expect that the new sand box framework will see several new products and services introduced which would modernize both trading in listed securities on stock markets as well as private placement transactions and even over the counter transactions.