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The Legislative Yuan passed the Statute for Fintech Development and Innovation Experiment

Robin Chang/Cyun-Ren Jhou


In response to the trends in development of fintech, the Legislative Yuan passed the Statute for Fintech Development and Innovation Experiment (this "Statute") and additional Articles to eight major banking and financial service law on December 29, 2017 to provide a safe environment for testing fintech products, services, business models and mechanism of supply chain management, and to exempt fintech innovation from the current general regulatory requirements in the financial sector for the purpose of boosting business opportunities and innovative vitality.
 
The effective date of this Statute is to be set separately by the Executive Yuan. Key points in this Statute are as follows:
 
I.  General principles and definition of innovation experiment
 
1.   This Statute aims to establish a safe environment for fintech innovation experiments, develop new finanical products and sevices based-on creative technology, prompt financial inclusion and development in fintech, and implement the protection of innovation experiment participants and financial consumers. (Article 1)
 
2.   The "innovation experiment" referrd to in this Statute shall satisfy the following five conditions: (Articles 3 and 7)
 
a.    being within the scope of financial busninesses which requires the permit, approval or license issued by FSC;
 
b.   involving innovation;
 
c.    can improve efficiency of financial services, reduce costs or enhance benefits to financial consumers and the businesses;
 
d.   having potential risks assessment and mitigating measures in place covering areas such as experiments with fintech solutions, data protection, anti-money laundering/counter-terriorism financing; and
 
e.    having protecitve measures for participants and appropriate compensation arrangements in place.
 
3.   The competent authority for this Statute is the Financial Supervisory Commission ("FSC"). (Article 2)
 
II.   Application for and review of innovation experiment
 
1.   A natural person, sole proprietorship, partnership or juristic person may be an applicant such application must not have nay negative qualifications under this Statute. (Articles 4 and 5)
 
2.   The FSC shall review the application and invite scholars, experts and relevant institutions and convene meetings to decide whether to approve or reject the application within 60 working days after the FSC receives said application. (Article 8)
 
3.   Approval of innovation experiment: (Article 9)
 
a.    The duration of the experiment shall not exceed one year and an extension for up to six months is allowed. Where an amendment to regulation is required for the purpose of such innovation experiment, further extension is allowed, provided thatthe total duration of the innovation experiment shall not exceed three years.
 
b.   The FSC may take the following measures regarding the experiment such as requiring adjustments or changes to the experiment, qualification requirments of participants, imposing other conditions or undertakings, or granting exemptions in respect of specific regulatory requirements.
 
III.  Supervision and management of innovation experiments
 
1.   The applicant shall commence the innoviation expermint within three months after receiving the notice of the approval decision. (Article 12)
 
2.   The applicant shall comply with this Statute and the directions given by the FSC, and provide information or explainations on the experimentation upon request from the FSC.The FSC may conduct on-site visits when deemed neceesary, and may rescind the approval if it determins that the experiment may have materialy adverse impact. (Articles14 and 15)
 
3.   The applicant shall report the result of the innovation experiment to the FSC within one month after the expiry of the experiment period. (Article 16)
 
4.   The FSC shall propose draft amendments, provide assistance to startups and in strategic cooperation as well as regulatory guidance according to the outcomes of the innovation experiment. The draft amendments to related banking and financial services regulations shall be proposed by the FSC and submitted to the Executive Yuan for review within three months after the end of the innovation experiment. (Article 17).
 
IV.  Protection of participants
 
1.   The applicant may not restrict or waive in advance its liability to the participants as set out in this Statute and the FSC's approval order. (Article 20)
 
2.   The applicant, in providing the financial products or services, shall exercise the due care of a goood administrator throughout the duration of its innovation experiment; for any financial products or services it provides that have the nature of a trust or mandated arrangment, and the applicant shall also bear such duty of loyalty as required by applicable laws and regilations or contractual agreements. (Article 21)
 
3.   The applicant shall establish sufficient protection and exit mechanism for participants and clearly define the scope, rights and obligation and associated risks of the innovation experiment in the contract with participants. Before entring ino the contact with participants, the applicant shall notify its participants in advance about the aforementioned matters and obtain the participants' consent. The relevant explanation requirements under the Financial Consumer Protection Act shall applymutatis mutandis to the aforementioned explanation obligations. (Article 23)
 
V.    Waivers and exemptions
 
1.   Throughout the duration of innovation experiment, the FSC may determine the exemption from certain legal and regulatory requirements on a case by case basis. However, the Money Laundering Control Act and the Counter-terrorism Financing Act shall prevail and may not be exemtped. (Article 25)
 
2.   Throughout the duration of the experiment, the criminal liabilty arising from engaing in specially regulated financial activities may be exempted. (Article 26)
 
VI.  Addition Articles to eight major banking and financial services regulations
 
The Legislative Yuan passed the following additional Articles to eight major banking and financial service laws on December 29, 2017, applicable to financial institutions as the legal basis when conducting fintech innovation experiments.
 
a.    Article 22- 1 of the Banking Act
 
b.   Article 136- 1 of the Insurance Act
 
c.    Article 3- 1 of the Trust Law
 
d.   Article 44- 1 of the Securities and Exchange Act
 
e.    Article 6- 1 of the Securities Investment Trust and Consulting Act
 
f.    Article 5- 1 of the Futures Trading Act
 
g.   Article 3- 1 of the Act Governing Electronic Payment Institutions
 
h.   Article 5- 2 of the Act Governing Issuance of Electronic Stored Value Cards

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