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The Florida Statutes

The 2020 Florida Statutes

Title XXXIII
REGULATION OF TRADE, COMMERCE, INVESTMENTS, AND SOLICITATIONS
Chapter 559
REGULATION OF TRADE, COMMERCE, AND INVESTMENTS, GENERALLY
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F.S. 559.952
559.952 Financial Technology Sandbox.
(1) SHORT TITLE.This section may be cited as the “Financial Technology Sandbox.”
(2) CREATION OF THE FINANCIAL TECHNOLOGY SANDBOX.There is created the Financial Technology Sandbox within the Office of Financial Regulation to allow financial technology innovators to test new products and services in a supervised, flexible regulatory sandbox using exceptions to specified general law and waivers of the corresponding rule requirements under defined conditions. The creation of a supervised, flexible regulatory sandbox provides a welcoming business environment for technology innovators and may lead to significant business growth.
(3) DEFINITIONS.As used in this section, the term:
(a) “Business entity” means a domestic corporation or other organized domestic entity with a physical presence, other than that of a registered office or agent or virtual mailbox, in this state.
(b) “Commission” means the Financial Services Commission.
(c) “Consumer” means a person in this state, whether a natural person or a business organization, who purchases, uses, receives, or enters into an agreement to purchase, use, or receive an innovative financial product or service made available through the Financial Technology Sandbox.
(d) “Control person” means an individual, a partnership, a corporation, a trust, or other organization that possesses the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or through other means. A person is presumed to control a company if, with respect to a particular company, that person:
1. Is a director, a general partner, or an officer exercising executive responsibility or having similar status or functions;
2. Directly or indirectly may vote 10 percent or more of a class of a voting security or sell or direct the sale of 10 percent or more of a class of voting securities; or
3. In the case of a partnership, may receive upon dissolution or has contributed 10 percent or more of the capital.
(e) “Corresponding rule requirements” means the commission rules, or portions thereof, which implement the general laws enumerated in paragraph (4)(a).
(f) “Financial product or service” means a product or service related to a consumer finance loan, as defined in s. 516.01, or a money transmitter or payment instrument seller, as those terms are defined in s. 560.103, including mediums of exchange that are in electronic or digital form, which is subject to the general laws enumerated in paragraph (4)(a) and corresponding rule requirements and which is under the jurisdiction of the office.
(g) “Financial Technology Sandbox” means the program created by this section which allows a licensee to make an innovative financial product or service available to consumers during a sandbox period through exceptions to general laws and waivers of corresponding rule requirements.
(h) “Innovative” means new or emerging technology, or new uses of existing technology, which provide a product, service, business model, or delivery mechanism to the public and which are not known to have a comparable offering in this state outside the Financial Technology Sandbox.
(i) “Licensee” means a business entity that has been approved by the office to participate in the Financial Technology Sandbox.
(j) “Office” means, unless the context clearly indicates otherwise, the Office of Financial Regulation.
(k) “Sandbox period” means the initial 24-month period in which the office has authorized a licensee to make an innovative financial product or service available to consumers, and any extension granted pursuant to subsection (7).
(4) EXCEPTIONS TO GENERAL LAW AND WAIVERS OF RULE REQUIREMENTS.
(a) Notwithstanding any other law, upon approval of a Financial Technology Sandbox application, the following provisions and corresponding rule requirements are not applicable to the licensee during the sandbox period:
1. Section 516.03(1), except for the application fee, the investigation fee, the requirement to provide the social security numbers of control persons, evidence of liquid assets of at least $25,000, and the office’s authority to investigate the applicant’s background. The office may prorate the license renewal fee for an extension granted under subsection (7).
2. Section 516.05(1) and (2), except that the office shall investigate the applicant’s background.
3. Section 560.109, only to the extent that the section requires the office to examine a licensee at least once every 5 years.
4. Section 560.118(2).
5. Section 560.125(1), only to the extent that the subsection would prohibit a licensee from engaging in the business of a money transmitter or payment instrument seller during the sandbox period.
6. Section 560.125(2), only to the extent that the subsection would prohibit a licensee from appointing an authorized vendor during the sandbox period. Any authorized vendor of such a licensee during the sandbox period remains liable to the holder or remitter.
7. Section 560.128.
8. Section 560.141, except for s. 560.141(1)(a)1., 3., 7.-10. and (b), (c), and (d).
9. Section 560.142(1) and (2), except that the office may prorate, but may not entirely eliminate, the license renewal fees in s. 560.143 for an extension granted under subsection (7).
10. Section 560.143(2), only to the extent necessary for proration of the renewal fee under subparagraph 9.
11. Section 560.204(1), only to the extent that the subsection would prohibit a licensee from engaging in, or advertising that it engages in, the selling or issuing of payment instruments or in the activity of a money transmitter during the sandbox period.
12. Section 560.205(2).
13. Section 560.208(2).
14. Section 560.209, only to the extent that the office may modify, but may not entirely eliminate, the net worth, corporate surety bond, and collateral deposit amounts required under that section. The modified amounts must be in such lower amounts that the office determines to be commensurate with the factors under paragraph (5)(c) and the maximum number of consumers authorized to receive the financial product or service under this section.
(b) The office may approve a Financial Technology Sandbox application if one or more of the general laws enumerated in paragraph (a) currently prevent the innovative financial product or service from being made available to consumers and if all other requirements of this section are met.
(c) A licensee may conduct business through electronic means, including through the Internet or a software application.
(5) FINANCIAL TECHNOLOGY SANDBOX APPLICATION; STANDARDS FOR APPROVAL.
(a) Before filing an application for licensure under this section, a substantially affected person may seek a declaratory statement pursuant to s. 120.565 regarding the applicability of a statute, a rule, or an agency order to the petitioner’s particular set of circumstances or a variance or waiver of a rule pursuant to s. 120.542.
(b) Before making an innovative financial product or service available to consumers in the Financial Technology Sandbox, a business entity must file with the office an application for licensure under the Financial Technology Sandbox. The commission shall, by rule, prescribe the form and manner of the application and how the office will evaluate and apply each of the factors specified in paragraph (c).
1. The application must specify each general law enumerated in paragraph (4)(a) which currently prevents the innovative financial product or service from being made available to consumers and the reasons why those provisions of general law prevent the innovative financial product or service from being made available to consumers.
2. The application must contain sufficient information for the office to evaluate the factors specified in paragraph (c).
3. An application submitted on behalf of a business entity must include evidence that the business entity has authorized the person to submit the application on behalf of the business entity intending to make an innovative financial product or service available to consumers.
4. The application must specify the maximum number of consumers, which may not exceed the number of consumers specified in paragraph (f), to whom the applicant proposes to provide the innovative financial product or service.
5. The application must include a proposed draft of the statement or statements meeting the requirements of paragraph (6)(b) which the applicant proposes to provide to consumers.
(c) The office shall approve or deny in writing a Financial Technology Sandbox application within 60 days after receiving the completed application. The office and the applicant may jointly agree to extend the time beyond 60 days. Consistent with this section, the office may impose conditions on any approval. In deciding whether to approve or deny an application for licensure, the office must consider each of the following:
1. The nature of the innovative financial product or service proposed to be made available to consumers in the Financial Technology Sandbox, including all relevant technical details.
2. The potential risk to consumers and the methods that will be used to protect consumers and resolve complaints during the sandbox period.
3. The business plan proposed by the applicant, including company information, market analysis, and financial projections or pro forma financial statements, and evidence of the financial viability of the applicant.
4. Whether the applicant has the necessary personnel, adequate financial and technical expertise, and a sufficient plan to test, monitor, and assess the innovative financial product or service.
5. Whether any control person of the applicant, regardless of adjudication, has pled no contest to, has been convicted or found guilty of, or is currently under investigation for fraud, a state or federal securities violation, a property-based offense, or a crime involving moral turpitude or dishonest dealing, in which case the application to the Financial Technology Sandbox must be denied.
6. A copy of the disclosures that will be provided to consumers under paragraph (6)(b).
7. The financial responsibility of the applicant and any control person, including whether the applicant or any control person has a history of unpaid liens, unpaid judgments, or other general history of nonpayment of legal debts, including, but not limited to, having been the subject of a petition for bankruptcy under the United States Bankruptcy Code within the past 7 calendar years.
8. Any other factor that the office determines to be relevant.
(d) The office may not approve an application if:
1. The applicant had a prior Financial Technology Sandbox application that was approved and that related to a substantially similar financial product or service;
2. Any control person of the applicant was substantially involved in the development, operation, or management with another Financial Technology Sandbox applicant whose application was approved and whose application related to a substantially similar financial product or service; or
3. The applicant or any control person has failed to affirmatively demonstrate financial responsibility.
(e) Upon approval of an application, the office shall notify the licensee that the licensee is exempt from the provisions of general law enumerated in paragraph (4)(a) and the corresponding rule requirements during the sandbox period. The office shall post on its website notice of the approval of the application, a summary of the innovative financial product or service, and the contact information of the licensee.
(f) The office, on a case-by-case basis, shall specify the maximum number of consumers authorized to receive an innovative financial product or service, after consultation with the Financial Technology Sandbox applicant. The office may not authorize more than 15,000 consumers to receive the financial product or service until the licensee has filed the first report required under subsection (8). After the filing of that report, if the licensee demonstrates adequate financial capitalization, risk management processes, and management oversight, the office may authorize up to 25,000 consumers to receive the financial product or service.
(g) A licensee has a continuing obligation to promptly inform the office of any material change to the information provided under paragraph (b).
(h)1. The following information provided to and held by the office in a Financial Technology Sandbox application under this subsection is confidential and exempt from s. 119.07(1) and s. 24(a), Art. I of the State Constitution:
a. The reasons why a general law enumerated in paragraph (4)(a) prevents the innovative financial product or service from being made available to consumers.
b. The information provided for evaluation of the factors specified in subparagraphs (c)1. and 3.
c. The information provided for evaluation of whether the applicant has a sufficient plan to test, monitor, and assess the innovative financial product or service, under subparagraph (c)4.

However, the confidential and exempt information may be released to appropriate state and federal agencies for the purposes of investigation. Nothing in this paragraph shall be construed to prevent the office from disclosing a summary of the innovative financial product or service.

2. This paragraph is subject to the Open Government Sunset Review Act in accordance with s. 119.15 and shall stand repealed on October 2, 2025, unless reviewed and saved from repeal through reenactment by the Legislature.
(6) OPERATION OF THE FINANCIAL TECHNOLOGY SANDBOX.
(a) A licensee may make an innovative financial product or service available to consumers during the sandbox period.
(b)1. Before a consumer purchases, uses, receives, or enters into an agreement to purchase, use, or receive an innovative financial product or service through the Financial Technology Sandbox, the licensee must provide a written statement of all of the following to the consumer:
a. The name and contact information of the licensee.
b. That the financial product or service has been authorized to be made available to consumers for a temporary period by the office, under the laws of this state.
c. That the state does not endorse the financial product or service.
d. That the financial product or service is undergoing testing, may not function as intended, and may entail financial risk.
e. That the licensee is not immune from civil liability for any losses or damages caused by the financial product or service.
f. The expected end date of the sandbox period.
g. The contact information for the office and notification that suspected legal violations, complaints, or other comments related to the financial product or service may be submitted to the office.
h. Any other statements or disclosures required by rule of the commission which are necessary to further the purposes of this section.
2. The written statement under subparagraph 1. must contain an acknowledgment from the consumer, which must be retained for the duration of the sandbox period by the licensee.
(c) The office may enter into an agreement with a state, federal, or foreign regulatory agency to allow licensees under the Financial Technology Sandbox to make their products or services available in other jurisdictions. The commission shall adopt rules to implement this paragraph.
(d) The office may examine the records of a licensee at any time, with or without prior notice.
(7) EXTENSION AND CONCLUSION OF SANDBOX PERIOD.
(a) A licensee may apply for one extension of the initial 24-month sandbox period for 12 additional months for a purpose specified in subparagraph (b)1. or subparagraph (b)2. A complete application for an extension must be filed with the office at least 90 days before the conclusion of the initial sandbox period. The office shall approve or deny the application for extension in writing at least 35 days before the conclusion of the initial sandbox period. In determining whether to approve or deny an application for extension of the sandbox period, the office must, at a minimum, consider the current status of the factors previously considered under paragraph (5)(c).
(b) An application for an extension under paragraph (a) must cite one of the following reasons as the basis for the application and must provide all relevant supporting information:
1. Amendments to general law or rules are necessary to offer the innovative financial product or service in this state permanently.
2. An application for a license that is required in order to offer the innovative financial product or service in this state permanently has been filed with the office and approval is pending.
(c) At least 30 days before the conclusion of the initial 24-month sandbox period or the extension, whichever is later, a licensee shall provide written notification to consumers regarding the conclusion of the initial sandbox period or the extension and may not make the financial product or service available to any new consumers after the conclusion of the initial sandbox period or the extension, whichever is later, until legal authority outside of the Financial Technology Sandbox exists for the licensee to make the financial product or service available to consumers. After the conclusion of the sandbox period or the extension, whichever is later, the business entity formerly licensed under the Financial Technology Sandbox may:
1. Collect and receive money owed to the business entity or pay money owed by the business entity, based on agreements with consumers made before the conclusion of the sandbox period or the extension.
2. Take necessary legal action.
3. Take other actions authorized by commission rule which are not inconsistent with this section.
(8) REPORT.A licensee shall submit a report to the office twice a year as prescribed by commission rule. The report must, at a minimum, include financial reports and the number of consumers who have received the financial product or service.
(9) CONSTRUCTION.A business entity whose Financial Technology Sandbox application is approved under this section:
(a) Is licensed under chapter 516, chapter 560, or both chapters 516 and 560, as applicable to the business entity’s activities.
(b) Is subject to any provision of chapter 516 or chapter 560 not specifically excepted under paragraph (4)(a), as applicable to the business entity’s activities, and must comply with such provisions.
(c) May not engage in activities authorized under part III of chapter 560, notwithstanding s. 560.204(2).
(10) VIOLATIONS AND PENALTIES.
(a) A licensee who makes an innovative financial product or service available to consumers in the Financial Technology Sandbox remains subject to:
1. Civil damages for acts and omissions arising from or related to any innovative financial product or services provided or made available by the licensee or relating to this section.
2. All criminal and consumer protection laws and any other statute not specifically excepted under paragraph (4)(a).
(b)1. The office may, by order, revoke or suspend a licensee’s approval to participate in the Financial Technology Sandbox if:
a. The licensee has violated or refused to comply with this section, any statute not specifically excepted under paragraph (4)(a), a rule of the commission that has not been waived, an order of the office, or a condition placed by the office on the approval of the licensee’s Financial Technology Sandbox application;
b. A fact or condition exists that, if it had existed or become known at the time that the Financial Technology Sandbox application was pending, would have warranted denial of the application or the imposition of material conditions;
c. A material error, false statement, misrepresentation, or material omission was made in the Financial Technology Sandbox application; or
d. After consultation with the licensee, the office determines that continued testing of the innovative financial product or service would:
(I) Be likely to harm consumers; or
(II) No longer serve the purposes of this section because of the financial or operational failure of the financial product or service.
2. Written notice of a revocation or suspension order made under subparagraph 1. must be served using any means authorized by law. If the notice relates to a suspension, the notice must include any condition or remedial action that the licensee must complete before the office lifts the suspension.
(c) The office may refer any suspected violation of law to an appropriate state or federal agency for investigation, prosecution, civil penalties, and other appropriate enforcement action.
(d) If service of process on a licensee is not feasible, service on the office is deemed service on the licensee.
(11) RULES AND ORDERS.
(a) The commission shall adopt rules to administer this section before approving any application under this section.
(b) The office may issue all necessary orders to enforce this section and may enforce these orders in accordance with chapter 120 or in any court of competent jurisdiction. These orders include, but are not limited to, orders for payment of restitution for harm suffered by consumers as a result of an innovative financial product or service.
History.s. 12, ch. 2020-161; s. 1, ch. 2020-162.