NY State Senate Bill 2017-S9188

Archive: Last Bill Status - In Senate Committee Rules Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
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Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Oct 26, 2018	referred to rules

2017-S9188 (ACTIVE) - Details

Current Committee:: Senate Rules
Law Section:: Financial Services Law
Laws Affected:: Add Art 7 §§701 - 707, Fin Serv L

2017-S9188 (ACTIVE) - Summary

Enacts the "regulatory sandbox act" to allow persons to obtain limited access to the marketplace in order to test innovations in financial products or services; provides requirements for application and approval; provides requirements for operating an innovation in the regulatory sandbox.

2017-S9188 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S9188

SPONSOR: GOLDEN
 
TITLE OF BILL:

An act to amend the financial services law, in relation to enacting the
regulatory sandbox act

 
PURPOSE::

Creates a regulatory sandbox to enable modernizers to obtain limited
access to New York markets to introduce innovations in financial
products and services. Entrepreneurs accepted into the sandbox will face
lesser regulatory hurdles, allow safe experimentation of fintech
products, and allow the launch of new business models.

 
SUMMARY OF PROVISIONS::

Section 1 provides for the title of the act to be known and cited as the
"regulatory sandbox act".

Sections 2 amends the financial services law by adding a new article 7
establishing the regulatory sandbox act.

Section 701 of the financial services law is created to lay out defi-
nitions for the act delineating the terms consumer, financial product or
service, innovation, person as a business entity and the regulatory
sandbox. The sandbox allows waivers from obtain certain licensure,
certifications, or recognitions of a person as being subject to regu-
lations as a financial institution or enterprise.

Section 702 describes the purpose of the act.

Section 703 lays out the application process for:

* entrance into the sandbox allowing for the testing of innovative
products;

* mandate that persons must be in good standing and authorized to do
business in the State;

* lay out the scope of products and services to be tested;

* provide for a fee for application; and,

* require that the Department of Financial Services approve or deny an
application within ninety days unless the department and the applicant
agree to an extension.

Section 704 provides for:

* an applicant accepted into the sandbox will have twelve months of
regulatory relaxations to test innovations;

* the consumer population must be New York State residents;

* no more than 50,000 consumers can contract or otherwise agree to use
the innovation during the test period;

* the mechanism for exiting the sandbox;

* disclosure requirements for entering the sandbox, and that these
disclosures must be provided to consumers before proceeding with a sand-
box transaction;

* requirements for books and records;

* inspection rights granted to the department;

* records must be maintained for five years after conclusion of the test
period;

* procedures for suspending a person access to the sandbox; and,

* revocation and denial of application procedures.

Section 705 provides for an up to six-month extension of sandbox partic-
ipation if a person requests and the Department grants the extension.

Section 706 permits the Superintendent to adopt and enforce all rules
necessary for the administration of the sandbox subject to the
provisions of the state administrative act.

Section 707 provides for possible judicial review of all decisions of
the Department of Financial Services under the act.

Section 3 of the bill provides for an immediate effective date.

 
JUSTIFICATION::

One of the major impediments to innovation in New York State is the
disconnect between the introduction of new technologies of use to real
consumers and ineffective existing regulatory and consumer protection
environments. This disconnect often erects unassailable hurdles to the
benefits of entrepreneurship, new financial technologies and procurement
reforms.

The concept of a regulatory sandbox allows the testing of innovations in
markets on a limited scale with tailored oversight and controlled envi-
ronments. The sandbox radically reduces the expected time-to-market with
much lower soft-costs, greater access to financial partners with risk
amelioration, and lesser licensure and normal regulatory burdens for a
limited testing time.

New York is one of only two, along with London, recognized financial
capitals of the world. However, this leadership position is being
severely challenged by innovative financial technologies and consumer
products that are being introduced in other states and global financial
centers. New York is too often seen as having regulations and procure-
ment policies that are duplicative, do not serve the interests of either
business or consumers, and gives the State a reputation as having a
financial services sector that has become very risk averse.

The regulatory sandbox is proposed to allow innovative firms to intro-
duce their products to the New York and global marketplaces without
these shackles and ineffective consumer protections. London has already
enacted a version of this type of controlled innovation experiments in
July of 2016, and has passed New York as the global leader in financial
technology modernization. Meanwhile the state legislatures of Illinois
and Phoenix, and the European Union are seriously considering some form
of this innovation accelerator.

Adoption of this legislation at the earliest opportunity is essential if
New York is maintain its global financial leadership. If successfully
enacted, this framework can be duplicated to other State agencies and
innovative sectors with significant savings to the State and our cutting
edge industries.

 
PRIOR LEGISLATIVE HISTORY::

New bill

 
FISCAL IMPLICATIONS::

None to the State.

 
EFFECTIVE DATE::

Immediately.

2017-S9188 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9188
 
                             I N  S E N A T E
 
                             October 26, 2018
                                ___________
 
 Introduced  by  Sen.  GOLDEN -- read twice and ordered printed, and when
   printed to be committed to the Committee on Rules
 
 AN ACT to amend the financial services law, in relation to enacting  the
   regulatory sandbox act
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. Short title. This act shall be known and may  be  cited  as
 the "regulatory sandbox act".
   §  2.  The financial services law is amended by adding a new article 7
 to read as follows:
                                 ARTICLE 7
                          REGULATORY SANDBOX ACT
 SECTION 701. DEFINITIONS.
         702. PURPOSE.
         703. APPLICATIONS; REVIEW.
         704. OPERATION.
         705. EXTENSION.
         706. RULES.
         707. JUDICIAL REVIEW.
   § 701. DEFINITIONS. AS USED IN THIS ARTICLE:
   (A) "CONSUMER" MEANS A PERSON WHO PURCHASES OR OTHERWISE ENTERS INTO A
 TRANSACTION OR AGREEMENT TO RECEIVE AN INNOVATIVE FINANCIAL  PRODUCT  OR
 SERVICE TESTED BY A PERSON PARTICIPATING IN THE REGULATORY SANDBOX.
   (B)  "FINANCIAL  PRODUCT  OR SERVICE" MEANS A PRODUCT OR SERVICE REGU-
 LATED BY THE DEPARTMENT OR A PRODUCT OR SERVICE THAT  INCLUDES  ELEMENTS
 THAT MAY OTHERWISE REQUIRE A LICENSE, CERTIFICATION, OR RECOGNITION AS A
 FINANCIAL INSTITUTION OR ENTERPRISE REGULATED BY THE DEPARTMENT.
   (C)  "INNOVATION"  MEANS,  WITH  RESPECT TO A PRODUCT OR SERVICE, THAT
 WHICH USES OR INCORPORATES NEW OR EMERGING TECHNOLOGY, OR NEW  USES  FOR
 EXISTING  TECHNOLOGY, TO ADDRESS A PROBLEM, PROVIDE A BENEFIT, OR OTHER-
 WISE OFFER A PRODUCT, SERVICE, BUSINESS  MODEL,  OR  DELIVERY  MECHANISM
 THAT  HAS NO COMPARABLE WIDESPREAD OFFERING IN THE MARKETPLACE REGULATED
 BY THE DEPARTMENT.

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD16644-02-8

 S. 9188                             2
 
   (D) "PERSON" MEANS AN INDIVIDUAL, PARTNERSHIP, JOINT  VENTURE,  TRUST,
 ESTATE,  FIRM, CORPORATION, ASSOCIATION, OR COOPERATIVE SOCIETY OR ASSO-
 CIATION.
   (E) "REGULATORY SANDBOX" MEANS THE PROGRAM ESTABLISHED BY THIS ARTICLE
 THAT  ALLOWS A PERSON TO TEMPORARILY TEST INNOVATIVE FINANCIAL PRODUCTS,
 SERVICES, BUSINESS MODELS, OR DELIVERY MECHANISMS  ON  A  LIMITED  BASIS
 WITHOUT  BEING  REQUIRED  TO  FIRST  OBTAIN A LICENSE, CERTIFICATION, OR
 RECOGNITION AS A REGULATED FINANCIAL INSTITUTION OR ENTERPRISE.
   § 702. PURPOSE. THE PURPOSE OF THE REGULATORY SANDBOX IS TO  ENABLE  A
 PERSON  TO OBTAIN LIMITED ACCESS TO THE NEW YORK MARKETPLACE IN ORDER TO
 TEMPORARILY TEST INNOVATIONS THROUGH THE REGULATORY  SANDBOX,  INCLUDING
 ALLOWING  THE  PERSON TO TEST INNOVATIONS WITHOUT FIRST HAVING TO OBTAIN
 LICENSURE WITH THE DEPARTMENT.
   § 703. APPLICATIONS; REVIEW.  (A) A PERSON MAY APPLY TO THE DEPARTMENT
 TO ENTER THE REGULATORY SANDBOX TO TEMPORARILY TEST  INNOVATIONS  BEFORE
 RELEASING THE INNOVATION TO NEW YORK CONSUMERS.
   (B)  AN APPLICATION TO ENTER THE REGULATORY SANDBOX SHALL BE IN A FORM
 PRESCRIBED BY THE SUPERINTENDENT.
   (C) AT THE TIME OF APPLICATION, AN APPLICANT SHALL PROVIDE THE DEPART-
 MENT WITH AN ACCURATE AND UP-TO-DATE EMAIL ADDRESS.
   (D) IF AN APPLICANT IS A CORPORATION, THE APPLICANT MUST  BE  IN  GOOD
 STANDING  AND  IN  STATUTORY COMPLIANCE WITH THE STATE OR COUNTRY OF ITS
 INCORPORATION.  IF AN APPLICANT IS AN ENTITY OTHER THAN  A  CORPORATION,
 THE  APPLICANT  MUST BE PROPERLY REGISTERED UNDER THE LAWS OF THIS STATE
 OR ANOTHER STATE OR COUNTRY. IF REQUIRED BY THE DEPARTMENT,  THE  APPLI-
 CANT MUST BE AUTHORIZED TO DO BUSINESS IN THE STATE OF NEW YORK.
   (E)  A  FINANCIAL INSTITUTION ALREADY REGULATED BY THE DEPARTMENT MUST
 FILE AN APPLICATION TO TEST PRODUCTS OR SERVICES THAT  ARE  OUTSIDE  THE
 SCOPE OF ITS CURRENT LICENSE.
   (F)  THE  FEE FOR AN APPLICATION TO ENTER THE REGULATORY SANDBOX SHALL
 BE FIVE HUNDRED DOLLARS.
   (G) THE DEPARTMENT SHALL APPROVE OR DENY AN APPLICATION WITHIN  NINETY
 DAYS  AFTER  THE  DATE OF RECEIPT OF THE APPLICATION. THE DEPARTMENT AND
 THE APPLICANT MAY AGREE TO EXTEND THE TIME BEYOND NINETY DAYS.
   § 704. OPERATION.  (A) AN APPLICANT APPROVED FOR THE REGULATORY  SAND-
 BOX HAS TWELVE MONTHS FROM THE DATE OF APPROVAL TO TEST THE INNOVATION.
   (B)  CONSUMERS UPON WHOM INNOVATIONS ARE TESTED MUST BE NEW YORK STATE
 RESIDENTS.
   (C) NO MORE THAN  FIFTY  THOUSAND  NEW  YORK  CONSUMERS  MAY  TRANSACT
 THROUGH OR ENTER INTO AN AGREEMENT TO USE THE INNOVATION.
   (D)  AT THE END OF THE INNOVATION'S TWELVE-MONTH TEST PERIOD, A PERSON
 TESTING AN INNOVATION MUST EXIT THE REGULATORY SANDBOX AND WIND DOWN THE
 OPERATION OF THE INNOVATION  WITHIN  SIXTY  DAYS,  EXCEPT  AS  OTHERWISE
 PROVIDED IN SECTION SEVEN HUNDRED FIVE OF THIS ARTICLE.
   (E)  BEFORE  TEMPORARILY  TESTING AN INNOVATION, A PERSON APPROVED FOR
 THE REGULATORY SANDBOX MUST DISCLOSE, IN A CLEAR AND  CONSPICUOUS  FORM,
 TO NEW YORK CONSUMERS:
   (1) THE NAME AND CONTACT INFORMATION OF THE PERSON PROVIDING THE INNO-
 VATION;
   (2) THAT THE INNOVATION IS AUTHORIZED PURSUANT TO THE REGULATORY SAND-
 BOX AND NOT PURSUANT TO ANY LICENSE ISSUED BY THE DEPARTMENT;
   (3) THAT THE STATE OF NEW YORK DOES NOT ENDORSE OR RECOMMEND THE INNO-
 VATION;
   (4)  THAT  THE INNOVATION IS A TEMPORARY TEST THAT MAY BE DISCONTINUED
 AT THE END OF THE TEST PERIOD, INCLUDING THE EXPECTED END  DATE  OF  THE
 TEST PERIOD; AND

 S. 9188                             3
 
   (5)  THE  NAME  AND  CONTACT INFORMATION FOR THE DEPARTMENT, INCLUDING
 WHERE A CONSUMER MAY FILE A COMPLAINT REGARDING THE INNOVATION.
   THESE  DISCLOSURES MUST BE PROVIDED TO THE CONSUMERS BEFORE PROCEEDING
 WITH THE TRANSACTION.
   (F) A PERSON APPROVED FOR THE REGULATORY SANDBOX SHALL MAINTAIN BOOKS,
 ACCOUNTS, AND RECORDS FOR THE INNOVATION.
   (G) THE DEPARTMENT MAY INSPECT A PERSON IN THE REGULATORY  SANDBOX  AT
 ANY  TIME.   UNLESS IT WILL INTERFERE WITH THE DEPARTMENT'S DUTIES UNDER
 THIS ARTICLE, REASONABLE NOTICE OF THE INSPECTION SHALL BE GIVEN TO  THE
 PERSON IN THE REGULATORY SANDBOX. THE SUPERINTENDENT OR APPOINTED REPRE-
 SENTATIVE  SHALL HAVE FULL AND FREE ACCESS TO ALL THE BOOKS, PAPERS, AND
 RECORDS THAT RELATE TO THE INNOVATION.
   (H) A PERSON WHO WINDS DOWN THE  OPERATION  OF  THE  INNOVATION  SHALL
 PRESERVE  BOOKS,  ACCOUNTS, AND RECORDS, IN ANY FORM, FOR THE INNOVATION
 FOR FIVE YEARS AFTER THE CONCLUSION OF THE TEST PERIOD.
   (I) THE DEPARTMENT MAY SUSPEND ANY PERSON IN  THE  REGULATORY  SANDBOX
 FOR FAILING TO COMPLY WITH THIS ARTICLE, INCLUDING THE FAILURE TO COMPLY
 WITH  THE  DEPARTMENT'S  REQUEST  FOR BOOKS, ACCOUNTS, RECORDS, OR OTHER
 RELEVANT MATERIAL.
   (J) (1) THE SUPERINTENDENT MAY  REVOKE  OR  SUSPEND  ADMISSION  TO  OR
 REFUSE TO ADMIT A PERSON TO THE REGULATORY SANDBOX IF THE SUPERINTENDENT
 FINDS THAT:
   (A) THE PERSON HAS FAILED TO PAY THE APPLICATION FEE;
   (B)  THE  PERSON  HAS  VIOLATED  A PROVISION OF THIS ARTICLE OR A RULE
 ADOPTED BY THE SUPERINTENDENT UNDER THE AUTHORITY OF THIS ARTICLE;
   (C) A FACT OR CONDITION EXISTS WHICH, IF IT HAD EXISTED AT THE TIME OF
 THE ORIGINAL APPLICATION FOR ADMISSION TO THE REGULATORY SANDBOX,  WOULD
 HAVE  WARRANTED  THE SUPERINTENDENT IN REFUSING INITIAL ADMISSION TO THE
 REGULATORY SANDBOX; OR
   (D) THE PERSON HAS MADE A FALSE STATEMENT OR A FALSE REPRESENTATION TO
 THE SUPERINTENDENT IN APPLICATION FOR ADMISSION TO THE REGULATORY  SAND-
 BOX.
   (2)  WHEN  A  PERSON'S  ADMISSION TO THE REGULATORY SANDBOX IS DENIED,
 SUSPENDED, OR REVOKED, THE SUPERINTENDENT SHALL SERVE  THE  PERSON  WITH
 NOTICE  OF  HIS  OR HER ACTION, INCLUDING A STATEMENT OF THE REASONS FOR
 HIS OR HER ACTION, PERSONALLY, BY ELECTRONIC MAIL, OR BY  REGULAR  MAIL.
 SERVICE  BY  MAIL  IS COMPLETED WHEN THE NOTICE IS DEPOSITED IN THE U.S.
 MAIL. SERVICE TO THE EMAIL ADDRESS OF RECORD IS COMPLETED WHEN SENT.
   § 705. EXTENSION.  (A) A PERSON IN THE REGULATORY SANDBOX MAY  REQUEST
 A  ONE-TIME EXTENSION OF THE REGULATORY SANDBOX TEST PERIOD. THE REQUEST
 MUST BE MADE NO LATER THAN THE END OF THE ELEVENTH MONTH OF THE  INITIAL
 TWELVE-MONTH  TEST PERIOD. THE REQUEST FOR AN EXTENSION MUST SPECIFY HOW
 LONG THE REQUESTER BELIEVES WILL BE NECESSARY TO  PRODUCE  A  CONCLUSIVE
 TEST AND STATE SPECIFIC REASONS WHY AN EXTENSION IS NECESSARY.
   (B) THE DEPARTMENT MAY GRANT A ONE-TIME TEST PERIOD EXTENSION OF UP TO
 SIX  MONTHS.  THE DEPARTMENT MUST GRANT OR DENY A REQUEST FOR A ONE-TIME
 TEST PERIOD EXTENSION BEFORE THE END OF THE  INITIAL  TWELVE-MONTH  TEST
 PERIOD. A DENIAL OF AN EXTENSION REQUEST IS WITHIN THE DEPARTMENT'S SOLE
 DISCRETION AND ANY SUCH DENIAL IS NOT APPEALABLE.
   §  706. RULES. THE SUPERINTENDENT MAY ADOPT AND ENFORCE ALL REASONABLE
 RULES NECESSARY OR APPROPRIATE FOR THE ADMINISTRATION OF  THIS  ARTICLE.
 THE  RULEMAKING SHALL BE SUBJECT TO THE PROVISIONS OF THE STATE ADMINIS-
 TRATIVE PROCEDURE ACT.
   § 707. JUDICIAL REVIEW. ALL  FINAL  ADMINISTRATIVE  DECISIONS  OF  THE
 DEPARTMENT UNDER THIS ARTICLE SHALL BE SUBJECT TO JUDICIAL REVIEW.
   § 3. This act shall take effect immediately.

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Senate Bill S9188

Sponsored By

Archive: Last Bill Status - In Senate Committee Rules Committee

2017-S9188 (ACTIVE) - Details

2017-S9188 (ACTIVE) - Summary

2017-S9188 (ACTIVE) - Sponsor Memo

2017-S9188 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S9188

Share this bill

Sponsored By

Martin J. Golden

Archive: Last Bill Status - In Senate Committee Rules Committee

2017-S9188 (ACTIVE) - Details

2017-S9188 (ACTIVE) - Summary

2017-S9188 (ACTIVE) - Sponsor Memo

2017-S9188 (ACTIVE) - Bill Text download pdf

Comments