Senate Select Committee on FinTechs and RegTechs Releases Interim Report

On 11 September 2019, the Senate established a Select Committee on Financial Technology and Regulatory Technology (“the Committee”). The Committee was to inquire and report on a number of matters in the financial technology ("FinTech") and regulatory technology ("RegTech") industries in Australia. In particular, the Committee was to consider the businesses within these industries, and to ensure competition and productivity within the industry to improve on customer experience, creation of jobs, and the ability for Australian businesses to participate in global opportunities.

The Committee was to present its final report in October 2020, but received an extension on 24 April 2020. The final report is to be submitted by 16 April 2021. In the beginning of September 2020, the Committee released an interim report containing its findings thus far, along with 32 recommendations for reform.

Committee Recommendations

As part of the findings, the Committee also addressed the effects of the current COVID-19 pandemic on the industry. Throughout the year, the Committee requested additional submissions, and held public hearings in order to better understand the ongoing effects on the industry. The evidence showed that the current situation had caused economic difficulties in the sector, however noted several changes that have arisen given the change in circumstances.

Changes such as virtual company meetings, digital signatures and videoconferencing for legal matters, telehealth, and ePrescriptions have allowed certain companies to grow during the time of the pandemic. In light of the growth that these new offerings have allowed companies, the Committee has proposed permanent amendments in order to maintain these technology gains in future. Some of the recommendations that the Committee has put forward, in this matter, include:

• Amendment of the Corporations Act 2001 (Cth) (“the Corporations Act”) to allow for flexibility in how prescribed meetings are held, in order to allow for virtual, in-person, or hybrid meetings (recommendation 1)
• Continuing implementation of an ePrescriptions service (recommendation 6)
• Promotion of RegTech solutions in assisting small to medium size businesses in their compliance under industrial awards (recommendation 8)

One of the other main areas of investigation for the Committee was taxation in relation to FinTechs and RegTechs. In particular, the Committee found that the process for applying for the Research and Development Tax Incentive (“R&DTI”) could be long, difficult, and resource intensive. As a result, start-ups were disadvantaged in the application process as they were more likely to be time and resource poor. Therefore, the Committee found that increased clarity and certainty regarding eligibility of businesses to receive the R&DTI was required in order to improve the situation (recommendation 9).

The other main areas of investigation for the Committee were regulation, access to capital, skill, and culture. Some of the other recommendations put forward by the Committee include:

• New requirements for a regular report from the Council of Financial Regulators on the competitive dynamics in the financial services market (recommendation 13)
• Establishment of a new national body in order to consolidate regulatory responsibilities in relation to the Consumer Data Right (recommendation 19)
• Introduction of new incentives to promote collaboration between large businesses and startups (recommendation 26)
• Creation of an Agricultural Technology (“AgTech”)  Advisory Council to advise on AgTech policies (recommendation 30)

Dissenting Report

The Labor Senators involved in the Committee were largely supportive of the majority of recommendations and commentary made within the interim report. However, noted that following the greater use of technologies and digitalized financial products, further improvement and advancement of consumer protections would be required. The Labor Senators do note, however, that their Dissenting Report is not a general dissent from the broader work of the Committee.

One of the recommendations not supported by the Labor Senators is recommendation 1, which would allow prescribed meetings under the Corporations Act to be done virtually, in-person, or in a hybrid manner. The main concern raised in regards to this recommendation was that this amendment would allow companies to provide for exclusively virtual meetings, which may impact fair and equitable participation amongst shareholders. The Labor Senators, suggests that hybrid meetings, rather than exclusively virtual meetings, would be more accessible to all shareholders.

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Interim Report: Financial Technology and Regulatory Technology (Senate Select Committee on Financial Technology and Regulatory Technology, Australian Parliament)