The U.S. Department of the Treasury (the "Treasury") has released a fourth report in a series of reports produced in response to Executive Order 13772, which sets out the Administration's seven core principles for regulating the U.S. financial system (the "Core Principles"). This report, entitled "A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation" (the "Fourth Report") analyzes and provides recommendations for the regulation of nonbank financial companies, the financial technology ("fintech") sector and other forms of financial market innovation through the lens of the Core Principles. Thematically, the Fourth Report primarily addresses the following two Core Principles: (1) making regulation efficient, effective, and appropriately tailored and (2) enabling American companies to be competitive with foreign firms in domestic and foreign markets.
This briefing will discuss the Treasury's "regulatory sandbox" proposal in the Fourth Report. Although short on specifics, the Fourth Report affirms Treasury's commitment in principle to the establishment of a regulatory sandbox for innovative fintech companies, in coordination with other federal and state regulators, and it goes so far as to recommend that if voluntary efforts to persuade state regulators to join are unavailing, Congress should legislatively override such resistance through federal preemption.
The Clifford Chance fintech team has previously distributed briefings discussing the Fourth Report's marketplace lending recommendations, and the related proposal by the Office of the Comptroller of the Currency ("OCC") to begin accepting applications for special-purpose national bank charters from fintech companies.