On 14 July 2022, the International Organization of Securities Commissions (IOSCO) issued a report on the use of innovation facilitators in growth and emerging markets. The report covers three types of innovation facilitators (IFs): innovation hubs, regulatory sandboxes, and regulatory accelerators.
Chapter 1 of the report covers definitions and the risks and opportunities posed by IFs. Chapter 2 presents the global trends in relation to IFs and an overview of emerging markets’ regulatory initiatives. Chapter 3 presents some examples of the current practices in advanced markets. Chapter 4 discusses the role of conducting a policy assessment in developing IFs. Finally, Chapter 5 sets out four key recommendations to assist emerging markets in developing initiatives related to IFs in their jurisdictions.
In summary the recommendations are:
- Recommendation 1. The relevant authorities should develop effective frameworks to support financial innovation, including IFs. Prior to the establishment of IFs, the relevant authorities should undertake a comprehensive analysis and assessment to ensure that the functions, scope, and operational structure of the IFs are designed in view of the local market conditions and are in accordance with the overall policy objectives. The relevant authorities should consider the potential impact IFs could have on investor protection, market integrity and financial stability.
- Recommendation 2. The objectives and functions of IFs should be clearly defined and should be made public. The relevant authorities should have in place innovation support functions with adequate resources according to the scope and objectives of the IFs. Good governance and accountability should be part of the design of the innovation facilitator.
- Recommendation 3. The scope of eligible entities and the criteria for application and selection should be clearly defined, transparent, and made public.
- Recommendation 4. The relevant authorities should have in place mechanisms for cooperation and exchange of information with both local and foreign relevant authorities to facilitate a holistic approach and knowledge regarding issues of a cross cutting nature or issues that may fall outside their statutory responsibility.