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Zambia Government Gazette dated 2020-12-18 number 6942

REPUBLIC OF ZAMBIA

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No. 6942] Lusaka, Friday, 18th December, 2020 [Vol. LV, No. 112

GAZETTE NOTICE NO. 1443 OF 2020 [9948389
Securities and Exchange Commission

Regulatory Sandbox Guidelines for Capital Markets

Guideline No 3 of 2020

KEY DEFINITIONS

“Act” the Securities Act No.41 of 2016 and any subsequent amendments thereof.
“Applicant” a firm that has applied to participate in the Sandbox.
“Consumer” all-natural persons and all registered firms (including non-profit, corporate, and statutory firms in Zambia who use
financial products or services.
“Fintech” a financial product / service / solution enabled by technology.
“Innovation” a proposed Fintech or innovative financial product / service / solution that does not exist in the capital markets or has
characteristics that are significantly different from existing ones. Innovations may include blockchain, crowdfunding,
peer to peer lending and investment, artificial intelligence, and automated investment advice.
“Live testing” putting on trial a proposed Fintech or other innovative product / service / solution in a live environment under a set
of conditions and limitations environment.
“Participant” a firm that has been successfully admitted into the Sandbox.
“Sandbox” a regulatory framework under which firms can test trial their proposed Fintech or other innovative products / services
/ solutions in a live environment under a set of conditions and limitations.

INTRODUCTION TO THE SANDBOX
1. In accordance with its mandate to regulate and promote the development of the Zambian Capital Market as enshrined in the Securities
Act (“the Act”), the Securities and Exchange Commission (“Commission”) seeks to create a regulatory sandbox (“sandbox”) environment
in which the testing of capital market innovations can be facilitated under a set of conditions and limitations designed to protect
investors, but without strict adherence to all the regulatory obligations required for engaging in such activities.
2. Given the rapid evolution of Fintech, financial sector regulators worldwide are scrutinising the development and application of
Fintech in financial markets to better understand the potential impact on consumers and market dynamics.
3. Zambia has over the years experienced advancements in Financial technology (Fintech) which has to a great extent, changed the
financial services landscape. The introduction of Fintech in financial markets has necessitated a shift from traditional business models
and paved way for innovation that add greater value to consumers, enhance efficiency and risk management, as well as foster financial
inclusion.
4. The Sandbox shall therefore be a controlled environment conducive for the deployment and live testing of innovations that are not
adequately addressed by the existing regulatory framework.

RATIONALE FOR THE DEVELOPMENT OF SANDBOX

I5. The use of innovations has grown significantly over the years. Innovations have presented immense benefits to the financial
services ecosystem, that is, consumers, financial service providers and market infrastructure (among others). However, it is evident
that the innovations present risks to the financial services ecosystem, some of which may include cyber risk, technology risk, data
privacy and protection risks, mis-selling risks, governance risk, etcetera.
6. The Commission has observed a notable increase in inquiries and applications from existing capital market operators and unregulated
firms, aspiring to deploy innovations, which would be captured under the Securities Act in full or in part.
7. Pursuant to the Commission’s market development mandate and also in living up to its national duty as a co-implementer of the
National Financial Inclusion Strategy (NFIS), the Commission is confident that the development of the Sandbox Regulatory Framework
will enhance innovations and facilitate increased participation in the development of customer-centric capital markets products and
services that leverage on technology. The Commission’s Strategic Objective No.2 is to “promote diversified and customer-centric

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