The Securities and Exchange Board of India (SEBI) notified the financial technology startups through a circular that they could test their innovations on live investors in a controlled environment for a specific time. The circular carries the rules which need to be followed by the fintech startups.
SEBI understands that using and adopting new technologies will help in developing and maintaining impartial, competent and transparent securities market ecosystem. This is why the SEBI has decided to be flexible, so the fintech startups can test their latest technologies.
Last year in the month of May, SEBI had laid out certain criteria to shortlist the fintech companies that would be permitted to test their solutions, but then it was done in an offline environment. SEBI permits entities registered with SEBI under Section 12 of the SEBI Act 1992, to participate and test within a monitoring sandbox.
All startups willing to participate must prove that their solutions are unique and of value to the Indian securities market. The startups must also justify their need to test their solutions on real investors. The SEBI will consider the ideals and have them evaluated by a team of experts. The submission will be overseen by a designated officer.
The standards set by SEBI also mandate the fintech firms to create a product which is not just ready for testing but could also be scaled up.
The startups must also prepare a risk management plan to moderate and control possible threats to any of the traders. They must make sure that the investors, on whom the solutions are being tests, get the same protection right like the other traders.
The SEBI formed a committee which involved Aarin Capital partner TV Mohandas Pai as chairman and members from the startup industry along with some experts. This committee has developed an “efficient ecosystem and formed a framework for innovation sandbox.”
We look forward to which startups would be given an opportunity to test their solutions. It would also be exciting to learn the different types of solutions these fintech startups come up with for the Indian securities market.