‘Ensuring Investor Protection’

SECURITIES AND EXCHANGE COMMISSION

SECURITIES INDUSTRY (REGULATORY SANDBOX LICENSING) GUIDELINES 2020

SEC/GUI/006/10/2020

ARRANGEMENT OF GUIDELINES

1. INTRODUCTION
2. OBJECTIVE OF THE GUIDELINES
3. ELIGIBILITY
4. APPLICATION PROCESSES
5. DOCUMENTS REQUIRED
6. APPROVAL PROCESSES
7. SELECTION CRITERIA
8. REJECTION OF AN APPLICATION
9. SAFEGUARDS, TERMS AND CONDITIONS
10. EXTENDING OR EXITING THE SANDBOX
11. REPORTING BY THE REGULATORY SANDBOX LICENCE HOLDER
12. DEFINITION OF TERMS
13. APPLICATION AND APPROVAL PROCESS
14. APPLICATION FORM

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 SECURITIES INDUSTRY (REGULATORY SANDBOX) LICENSING GUIDELINES 2020
PREAMBLE
In the exercise of the powers conferred on the Commission by Section 209 of the Securities Industry
Act 2016, (Act 929), these Guidelines are made this 8th day of October 2020.
1. INTRODUCTION
The Commission, pursuant to its mandate to promote the growth and development of an efficient, fair
and transparent market, seeks to encourage more creativity so that promising innovations, products
and services can be tested in the market with prospects for wider adoption in Ghana and abroad.

2. OBJECTIVE OF THE GUIDELINES

1) These guidelines shall provide a framework for the issuance of Regulatory Sandbox Licences
for the conduct of a capital market activity or related services for which there is the absence,
or no adequate provisions under any laws regulating the business or capital market activity.

3. ELIGIBILITY
(1) A person shall not be eligible for the grant of a Regulatory Sandbox Licence by the
Commission unless the Applicant has fully complied with applicable laws of incorporation.
(2) An Applicant shall comply with the Fit and Proper criteria of the Commission.

4. APPLICATION PROCESSES
(1) An Applicant seeking a Regulatory Sandbox Licence shall submit an application in the
common form (ANNEX A) with the required attachments to the Director-General of the
Commission for consideration.
(2) licencees of the Commission, or other firms that wish to provide capital market services or
Financial Technology ‘FinTech’ firms operating within the capital market space and
professional services firms partnering with or providing support to such businesses (the
“applicants”) can apply using ANNEX A to enter a regulatory sandbox (the “sandbox”) to test
innovative capital market products and services in the production environment but within a
well-defined space and duration. The sandbox shall include appropriate safeguards to contain
the consequences of failure and maintain the overall safety and soundness of the Capital
Market.
(3) Depending on the capital market service or the provision of support to the capital market
service provider to be tested, the applicant involved and the application made, the Commission
shall determine the specific legal and regulatory requirements which it is prepared to relax for
each case. Please refer to ANNEX B for examples of the legal and regulatory requirements
that the Commission may consider relaxing for the duration of the sandbox, as well as those
which the Commission intends to maintain.
(4) Promoters of Sandbox must not have criminal records

5. DOCUMENTS REQUIRED
An application for a Regulatory Sandbox Licence shall not be considered unless the following
documents are received by the Commission:
(1) Business registration/incorporation documents applicable to the applicant
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 (2) A three to five year business plan including a feasibility study, and which provides inter alia
project description, financial forecast, initial investment, funding sources, audited financial
statements for the past three (3) years for an existing company (or for the number of years in
existence, if less than three years) or audited statement of affairs as applicable and regulatory
constraints on the proposed capital market activity or related services to be conducted by the
applicant.
(3) Particulars of promoters, beneficial ownership, and directors of the applicant where applicable.
(4) Any other information or documents that the Commission may require of the applicant
especially those contained in Annex A.
(5) Existing relevant regulatory framework (if any)

6. APPROVAL PROCESSES
(1) Where the Commission receives an application for a sandbox license, it shall:
a. Conduct an initial screening of the application within 20 working days
b. Upon the Commission satisfying itself that the required information or documents have been
provided, the application shall be submitted to a technical Committee for evaluation.
(2) The Commission may decide whether or not to issue a Sandbox license based on the
recommendations of the Technical Committee.
(3) Approval process for licensing shall not exceed 90 days from the date of submission of duly
completed application. Where the period of approval extends beyond 90 days, the Commission
shall inform the applicant with list of conditions or documents required to be submitted by the
applying entity.
(4) All approvals shall be communicated in writing with a certificate as evidence of certification
for operations.
(5) Upon approval, the applicant shall become the entity responsible for deploying and operating
the sandbox (the “sandbox entity”), with the Commission providing the appropriate regulatory
support by relaxing specific legal and regulatory requirements prescribed by the Commission
which the sandbox entity shall otherwise be subject to, for the duration of the sandbox.
(6) Upon successful testing and on exiting the sandbox, the sandbox entity shall fully comply with
the relevant legal and regulatory requirements.

7. SELECTION CRITERIA
An applicant seeking a Regulatory Sandbox Licence shall demonstrate that:
1) The Applicant’s product or service is genuinely innovative or applied in an innovative
way and not similar to those already available for which market operators are licensed
by the Commission.
2) The product or service has clear potential to benefit the market and investors in
identified ways;
3) The Applicant has assessed, and demonstrated, the usefulness and functionality of the
product and understands the associated risks;
4) The applicant has the necessary resources to participate, as well to assess, mitigate and
control potential risks and losses;
5) The initiative shall subject itself to be closely monitored during the trial period by the
Commission.
6) The applicant intends to deploy the product on a commercial scale in Ghana upon exit;
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 7) The product cannot be offered to the market at present due to prohibitions under
existing laws or regulations or is wholly or partly incompatible with applicable
regulatory requirements;
8) The existing legal framework must have had in contemplation, the business or market
activity for which the Regulatory Sandbox Licence is applied and
9) Any other conditions that the Commission may require of an applicant.

8. REJECTION OF AN APPLICATION
The Commission may reject an application for a Regulatory Sandbox licence on such conditions
including but not limited to;
(1) Where the Commission is of the opinion that the market activity, product or service
proposed is against public policy or interest.
(2) Where the market activity or the proposed product or service is very risky or may pose
significant risk to the entire capital market, or
(3) Where the Commission is of the opinion that it has not got the human resource capacity
or expertise to control, monitor and evaluate, or regulate the market activity, product or
service proposed by the applicant.
(4) Any other reason that the Commission considers justifiable.
(5) Where the Commission rejects an application for the issuance of a Regulatory Sandbox
licence, the Commission may give written reasons for the refusal of the application.

9. SAFEGUARDS, TERMS AND CONDITIONS

The Commission may issue a Regulatory Sandbox licence subject to such safeguards, terms
and conditions which may include the following:
(1) Consumer protection terms
(2) Availability of consumer redress mechanism such as the possibility of financial compensation
under clearly defined specified circumstances.
(3) Availability of adequate resources to undertake the testing, development of the capital market
activity, product or service to mitigate risk, and to contain the consequences of failure.
(4) The mechanism of maintaining appropriate risk management systems and processes including
adequate confidentiality and security controls as well as contingency arrangement to address
fraud and operational disruptions.
(5) Restrictions against application of the Regulatory Sandbox licence that will result in unfair
competition with other existing licensees of the Commission.
(6) There must be a need for a sandbox (no alternative means of releasing the innovation to the
market)
(7) Full disclosure of all risks and mitigation measures associated with the capital market activity,
product/solution.
(8) Any other terms and conditions that the Commission considers justifiable

10. EXTENDING OR EXITING THE SANDBOX

(1) At the end of the sandbox period, the legal and regulatory requirements relaxed by the
Commission shall expire, and the sandbox entity shall exit from the sandbox.
(2) In the event that the sandbox entity requires an extension of the sandbox period, the sandbox
entity shall apply to the Commission at least 1 month before the expiration of the sandbox
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 period providing reasons to support the application for extension. The Commission shall
review the application and approval may be granted on a case-by-case basis. The
Commission’s decision on the application for extension shall be at its sole discretion and shall
remain final.
(3) Upon exiting, the sandbox entity may proceed to deploy the product or service under testing
on a broader scale, provided that:
a. both the Commission and the sandbox entity are satisfied that the sandbox has achieved
its intended test outcomes; and
b. the sandbox entity can fully comply with the relevant legal and regulatory requirements.
(4) The sandbox shall be discontinued where:
a. The Licensee fails to commence business for which the sandbox licence was issued
within three months of issuing same.
c. The licensee breaches any of the terms and conditions under which the licence was
issued
d. The Commission is of the opinion that the licensee has failed or is failing to ensure risk
control
e. The Commission is of the opinion that the licensee cannot comply with established
conditions and safeguards intrinsic to the licence.
f. The Commission is not satisfied that the sandbox has achieved its intended purpose,
based on the latest test scenarios, expected outcomes and schedule mutually agreed with
the sandbox entity;
g. The sandbox entity is unable to fully comply with the relevant legal and regulatory
requirements at the end of the sandbox period. If such a situation is anticipated, the
sandbox entity is encouraged to engage the Commission as soon as it becomes aware;
h. A flaw has been discovered in the capital market activity, product or service under
testing where the risks posed to customers or the capital market outweigh the benefits
of the activity product or service under said testing, and the sandbox entity
acknowledges that the flaw cannot be resolved within the duration of the sandbox;
i. The sandbox entity breaches any condition imposed for the duration of the sandbox
licence;
j. The sandbox entity has informed the Commission of its decision to exit the sandbox at
its own discretion.
(5) The sandbox entity shall ensure that any existing obligation to its customers in relation to the
product or service under testing shall be fully fulfilled or addressed before exiting the sandbox
or discontinuing the sandbox.
(6) The Commission may also impose or issue such additional directives as are necessary for
safeguarding and protecting the interest of investors after the exit.

11. REPORTING BY THE REGULATORY SANDBOX LICENCE HOLDER

(1) Each Regulatory Sandbox licence holder shall furnish the Commission with a report containing
information and other disclosures determined by the Commission on its activities during the
period of its licence on weekly, monthly, quarterly or annual basis or a combination of the
periods as prescribed by the conditions of its licence.
(2) Each Regulatory Sandbox Licence holder shall notify the Commission within 14 days of any
changes in any information of the licence holder which was provided to the Commission during
its application for the sandbox licence.

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12. APPLICATION FORM
(ANNEX A)

APPLICATION FOR THE GRANT/EXTENSION OF A REGULATORY SANDBOX

LICENCE TO CARRY ON BUSINESS ON THE CAPITAL MARKET

1. General Information
(a) Registered name of applicant
(b) Address
(c) Location of Principal Place of Business
(d) Location/Address of Branches (if applicable)
(e) Telephone number
(f) Fax
(g) E-mail
(h) Name and Address of Principal Bankers and Bank Account Numbers
(specify trust accounts)
(i) Name and Address of Secretary (if applicant is a company)
(j) Name and Address of the External Auditors of the applicant

2. Type of application
(1) Please indicate if this is an initial application for a licence or whether it is
an extension of an existing Sandbox licence –
(a) initial application
or
(b) extension
(2) If it is for the extension of an existing Sandbox licence please furnish the
following information
(a) date of issue of existing licence; and
(b) licence number.

3. Legal Status
(1) If applicant is incorporated in Ghana please specify whether applicant is -
(a) incorporated under the Companies Act 2019, (Act 992); or
(b) incorporated under the Incorporated Private
Partnerships Act, 1962.
(2) If applicant is incorporated outside Ghana please specify the jurisdiction
and the Act under which the applicant is incorporated.
(3) Please confirm whether the Companies Act Regulations/ partnership
agreement of the applicant permits it to engage in the business for which
the Sandbox licence is sought.

4. Capital structure and shareholding

(1) Please specify -
(i) authorised shares;
(ii) issued shares; and

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 (iii) paid up capital.
(2) Please specify the names and addresses of all shareholders with 5% or more
shareholding in the applicant.

5. Other businesses
Please give details of other businesses (if any) the applicant is engaged in other
than the business for which a Sandbox licence is being applied.

6. Particulars of directors/partners and management

(1) Please specify name, address and profession/occupation of every
director/partner of the applicant along with any other directorships held by
them.
(2) Please also specify if they will be executive or non-executive.
(3) Please specify the name, address and qualifications of the chief executive
officer of the applicant along with any other directorships held by him/her.
7. Organisation chart
Please annex a chart setting out by way of a diagram the organisational structure
of the applicant with particular reference to supervision and lines of reporting.

8. Group and associated person information

Please specify names of the holding company, subsidiary companies and
associates of the applicant indicating companies or partnerships in which the
applicant has an interest.

9. Staff
(1) Please name the directors/partners, owners and employees of the applicant
who will be involved in the operations of the business for which the licence
is sought.
(2) Please specify qualifications and experience and whether these persons are
holders of market operators’ representative licences under the Act.
(3) Please provide the names and addresses of
documentation/computer/accounting/administration and clerical staff of the
applicant.
(4) Please specify location and custodian of the register of interests in securities
required to be maintained under section 127(1) of the Act where applicable

We the undersigned certify that the above information is true and accurate. We undertake
in the event of our application being accepted/our Sandbox licence being extended to
abide by the Act, Regulations made under the Act, Rules, Statements of Principles,
Procedures, Guidelines, Codes, Directives, Circulars, Manuals, etc., present and
prospective issued from time to time by the Commission established by the Act. We also
undertake to inform the Commission immediately of any change in any of the particulars
stated in this application.

We confirm that –
(a) the applicant is not in the course of being wound up/or in bankruptcy;
(b) no receiver or manager has been appointed under any law with regard to the
business and assets of the applicant;
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(c) the applicant has not entered into any compromise or scheme of arrangement with
any of its creditors either in Ghana or outside which is still in operation;
(d) neither the applicant nor any of the directors/partners and executive officers of the
applicant have been -
(i) adjudged bankrupt anywhere;
(ii) convicted either within Ghana or elsewhere within the period of
10 years immediately preceding the date on which this application is
made of an offence involving fraud or dishonesty punishable on
conviction with imprisonment for a term of three months or more;
(iii) denied a licence as a market operator or representative or had a licence
issued under this Act to them suspended or revoked; or
(iv) directors or partners of an entity which has been denied a licence under
the Act or had any licence issued under this Act suspended or revoked.

We enclose -
1. A certified true copy of the certificate of incorporation/registration of the
company/Partnership Agreement.
2. A certified true copy of the Companies Act Regulations of the
applicant.
3. A certified true copy of the Audited Financial statements of the applicant
for the past three financial years or Statement of Affairs (where the
applicant is yet to commence operations or is yet to issue audited financial
statements).
4. Receipt in proof of payment of the licence fee prescribed.
5. Business plan (as defined in this guideline).
6. Tax clearance certificate with regard to the last period of
assessment.
7. A certified copy of the register of interests required to be maintained
under section 127 (1) in Form No. 5 (Schedule 7)

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ANNEX B
EXAMPLES OF FLEXIBILITY AROUND REGULATORY REQUIREMENTS AND
EXPECTATIONS FOR THE SANDBOX

The following table provides examples of the legal and regulatory requirements that the
Commission is prepared to consider relaxing for the duration of the sandbox, as well as those
which the Commission intends to maintain. It must be emphasised that the examples outlined
in the table are not exhaustive. Depending on the proposed capital market activity, product
or service, the applicant involved and the application made, the Commission shall solely
determine the specific legal and regulatory requirements which it is prepared to relax for
each case.

Examples of “To Maintain” requirements

Confidentiality of customer information

Fit and proper criteria particularly on honesty and integrity

Handling of customer’s moneys and assets by intermediaries

Prevention of money laundering and countering the financing of terrorism

Corporate Governance Requirements

Environmental/ climate change concerns

Examples of “Possible to Relax” requirements

Asset maintenance requirement

Board composition

Cash balances

Credit rating

Financial soundness

Capital adequacy

Licence fees

Management experience

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 Commissions Guidelines that may be applicable in each case and on case by case basis

Minimum liquid assets

Minimum paid-up capital

Relative size

Reputation

Track record

13. APPLICATION AND APPROVAL PROCESS

ANNEX C
To illustrate the application and approval process, ANNEX C provides a case study on how an
application that meets the Commission’s expectations is processed.
1.1 The following diagram depicts the application and approval process. The Commission shall
communicate with the applicant/sandbox entity in the course of evaluating the sandbox
application, and continue to do so during experimentation:

T0

SEC informs applicant of

SEC informs applicant the final status of its
of the potential sandbox application
Sandbox suitability of its
"pre-
application"
sandbox application
Up to 30 working days T1 Estimated time
clarificatio
n

Experiment Sandbox Sandbox extended

potentially application Proceed
suitable approved Change
Applicant Application Adjustments
Evaluation Experimental to deploy
submit a Stage Stage request
Stage on a
sandbox broader
applicatio scale
n to SEC

Sandbox Sandbox Sandbox

application is application is failed
not suitable
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a. Prior to submitting an application, the applicant shall clarify any question regarding the
sandbox by contacting the Commission at [email protected]

b. The “Application Stage”, The Commission shall review the application and endeavour
to inform the applicant of its potential suitability for a sandbox licence within 20 working
days after the Commission receives a complete set of information necessary for the
assessment (T0). The preliminary indication serves to help the applicant with its
business and resource planning.

c. At the “Evaluation Stage”, the time required to fully assess the application (T1) is
dependent on its completeness and complexity, and the specific legal and regulatory
requirements involved. Due to the exploratory nature of the sandbox approach, the
applicant is allowed to make adjustments to the application for resubmission after
discussing with the Commission. The applicant shall be informed in writing whether
or not to proceed with the sandbox.

d. The applicant shall be informed if the application is rejected. The reasons for rejection
could include failure to meet the objective and principles of the sandbox or any of the
evaluation criteria. The applicant may re-apply for the sandbox when it is ready to meet
the objective, principles and evaluation criteria of the sandbox.

e. Upon approval of the application, the sandbox is launched into the “Testing Stage”, and
paragraph 8 of these guidelines shall apply. The sandbox entity shall notify its customers
that the applicant is operating in a sandbox and disclose the key risks associated with
the capital market activity, product or service. The sandbox entity is also required to
obtain the customers’ acknowledgement that they have read and understood these risks.

f. In the event that the sandbox entity intends to make material changes to the capital
market activity, product or service under testing during the “Testing Stage”, the
sandbox entity shall apply to the Commission at least 1 month in advance and provide
details of the changes with reasons (the “change requests”). The sandbox entity can
continue testing the existing product or service while the Commission reviews the
change requests and inform the sandbox entity of its decision.

g. For the purpose of transparency and provision of information to customers, relevant

information on all approved sandbox applications such as the name of the applicant,
and the start and expiry dates of the sandbox experimentation, may be published on the
Commission’s website.

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14. DEFINITION OF TERMS
In these guidelines –

“Act” means the Securities Industry Act, 2016 (Act 929);

“Commission” means the Securities and Exchange Commission established by section 1 of the
Act;
“Applicant” means a legal entity who intends to apply or has applied for a regulatory sandbox
licence to participate in the regulatory sandbox;
“FinTech” refers to any business that aims at providing financial services by making use of
software and modern technology;
“Regulatory Sandbox” refers to a framework that enables qualified firms and businesses to test
innovative capital market products and services in a tailored regulatory environment but within a
well-defined space and duration;
“Sandbox entity or Regulatory Sandbox Licence Holder” refers to a capital market operator or a
firm that wish to provide capital market services or a FinTech firm which has been given approval
to participate in the regulatory sandbox.

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