4. 4. Features Of The Reglab
Developing Financial Technology Services within the RegLab
FinTech Participants that qualify for authorisation under the RegLab framework will be granted an FSRA Financial Services Permission ("FSP") in accordance with section 30 of the FSMR to carry on the Regulated Activity of Developing Financial Technology Services within the RegLab.
Developing Financial Technology Services within the RegLab means the Regulated Activity specified in paragraph 73A of Schedule 1 to the FSMR.
The FinTech Participant authorised under the RegLab will be required to establish a commercial presence in ADGM.
The legislative requirements applicable to FinTech Participants under the RegLab framework will be tailored according to the specific characteristics and risks associated with the FinTech Proposal. This approach is consistent with the Regulator's objective to offer a responsive and risk-appropriate regulatory framework.
The requirements that will apply to FinTech participants under the RegLab framework may be adapted from existing regulations (including but not limited to the FSMR) and the FSRA Rules, as applicable.
As such, generally, the regulatory requirements applicable to all Persons to whom the FSMR applies would initially apply to each applicant for an FSP to carry on the Regulated Activity of Developing Financial Technology Services within the RegLab.
On receipt of the RegLab application, the Regulator will work with the applicant to identify those Rules (or Rulebooks, as the case may be) that are not relevant to the applicant's FinTech Proposal. The Regulator may then waive or modify any of these Rules or Rulebooks (in part or entirely, as appropriate) by way of a waiver or a modification notice.
As certain Rules will be waived or modified for the FinTech Participant under the RegLab, the Regulator will, among other things:-(a) set client and exposure limits to limit the scope and scale of the FinTech Participant's test activities; and(b) impose boundaries/geographical restrictions to ensure that client impact is controlled and the clients' interests are protected.
Please refer to section 5.2 below titled Authorisation Requirements for further details of the requirements that the Regulator may impose.
The Regulator may vary the applicable waivers and modifications as the FinTech Participants progress through different stages of testing of their FinTech solution. Variations will be subject to the changing risks that the FinTech Proposal may pose at any point.
The RegLab is not intended to create a risk-free FinTech environment — an acceptable degree of risk is unavoidable in all innovation and entrepreneurial endeavours. What the RegLab aims to achieve is a controlled environment that promotes FinTech innovation, yet minimises the risks of poor client outcomes posed by these innovative solutions.
Two-year validity period
The FSP granted under the RegLab will have a validity period of up to two years for the FinTech Participant to test its FinTech solution.
At the end of the two-year validity period (or earlier if the size, scale or progress of the FinTech Proposal warrants), the FinTech Participant will exit the RegLab and, if eligible, migrate to the full authorisation and supervisory regime under the FSMR.
To be eligible to migrate to the full authorisation and supervisory regime, the FinTech Participant will be required to demonstrate to the Regulator that it:-(a) has achieved its intended test outcomes under the RegLab so as to deploy the FinTech product on a broader scale, and(b) continues to be fit and proper to be an Authorised Person in the ADGM.
If the FinTech Participant is unable to satisfy the above criteria, it will be required to cease carrying on the Regulated Activity of Developing Financial Technology Services within the RegLab. The deadline for ceasing the Regulated Activity will be upon the expiry of its RegLab FSP, or at such time as the Regulator varies or cancels the FSP in accordance with section 33 of the FSMR. Please refer to section 8 below for more details.
During the two-year validity period, the Regulator will engage with and support the FinTech Participant and ensure the FinTech Participant operates within the parameters as set and agreed to prior to the grant of the FSP.
The two-year validity period of the authorisation granted under the RegLab may be extended in exceptional circumstances only, determined at the Regulator's discretion on a case-by-case basis.
Dedicated FinTech supervisory team
The Regulator's dedicated FinTech supervisory team will provide tailored guidance and support to applicants interested in applying to the RegLab and guide them in, among other things:-(a) understanding the RegLab regulatory framework;(b) preparing their RegLab application;(c) drawing up a risk-appropriate testing parameters; and(d) meeting their ongoing regulatory requirements.