The ECSRC is pleased to confirm it is now accepting applications to the first cohort of its regulatory sandbox (‘sandbox’) from prospective equity crowdfunding intermediaries. Applications are invited from 1 March 2023 until Friday, 21 April 2023.
The sandbox is designed to promote and facilitate financial innovation within the Eastern Caribbean Securities Market (ECSM) by:
- Helping firms test innovative financial products or services in the real-world with real consumers; and
- Helping the ECSRC learn about market developments and ensure appropriate regulatory frameworks are in place.
The sandbox is now accepting applications from prospective equity crowdfunding intermediaries. Equity crowdfunding allows investors to provide financing to companies, in exchange for shares (equity) in that business. It is hoped that this will provide a valuable alternative way for smaller companies (MSMEs) to finance themselves, and provide the public with another investment option.
Equity crowdfunding intermediaries will bring together companies with prospective investors (both retail and accredited investors) and facilitate transactions through the development of online platforms. Once authorised, these platforms will display investment opportunities from companies looking to raise money via equity crowdfunding, and allow investors to purchase equity in these companies.
More information on equity crowdfunding can be found on the ECSRC’s dedicated microsite at: https://ecsrccrowdfunding.com
The ECSRC has developed rules (currently in draft) which outline the requirements for becoming an equity crowdfunding intermediary, which can be found at: https://ecsrccrowdfunding.com/draft-rules/
Firms should review these rules before submitting their sandbox application. Firms are generally expected to be able to comply with these rules for the duration of their sandbox test. Key obligations are likely to include:
- Being incorporated or registered under the Companies Act in an ECCU member country;
- Having at all times a minimum paid-up capital of XCD67,500;
- Sufficient policies and procedures to comply with AML/CFT legal requirements, business conduct rules, and business continuity and cyber security measures;
- Arrangements to adequately manage fraud and conflicts of interest; and
- The ability to conduct appropriate due diligence of crowdfunding issuers.
The regulatory sandbox
The sandbox will look to support equity crowdfunding intermediaries based in the ECCU test their business model in the real market, helping them understand and navigate regulatory requirements, and work with them to design and then supervising a small-scale test to allow firms to operate in the market, while ensuring consumers are appropriately protected.
If the test is successful, firms will be able to transition out the sandbox, and operate at scale in the live market.
Sandbox eligibility criteria
Sandbox applications will be assessed against five eligibility criteria. These can be found at https://ecsrccrowdfunding.com/sandbox-eligibility/
Please provide as much information as possible about how you meet these criteria when submitting your application.
You do not currently need to be operating as an equity crowdfunding intermediary to apply, but you will need to be in a position to launch a suitable offering and comply with the relevant regulations, in order to be accepted into the sandbox.
How to apply
If you want to apply to test in the sandbox, please fill in our online application form at the link below. The deadline for submitting your application is Friday 21 April 2023.
This application form requests certain key information about your proposal and your proposed sandbox test and asks you to explain how your model meets each of the eligibility criteria.
After submitting your application, the ECSRC will review the information you have provided. The ECSRC may contact you with any questions or to request any further information that may help it determine your eligibility for the sandbox.
Testing in the sandbox
If your application to test in the sandbox is accepted, you’ll be assigned a dedicated case officer at the ECSRC who will be your main point of contact during the test.
The ECSRC will then work with you to establish the best sandbox approach by developing the testing parameters, success measures, reporting requirements and safeguards. This will include deciding on the start and end date of your participation in the sandbox, the target customers of the applicant, the limit on clients/customers involved, the type of activity that is permitted, thresholds, number or volume of transactions, consumer protection safeguards, and identification of risks.
The testing period will run for a maximum of 12 months.
At the end of the testing period, you will need to complete a final testing report, detailing the aim of the test and its results. The ECSRC and the applicant shall agree on the conditions to successfully exit the Regulatory Sandbox following the test.
Prospective applicants are encouraged to contact the ECSRC team if they have any questions before they apply.
Please contact us at https://ecsrccrowdfunding.com/contact/, and a member of the ECSRC team will respond to you.
The Eastern Caribbean Securities Regulatory Commission is working to promote the development of equity-based crowdfunding in the ECCU member countries to improve access to finance for MSMEs and financial inclusion.