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General Assembly Raised Bill No. 482
February Session, 2022
LCO No. 4001
Referred to Committee on FINANCE, REVENUE AND
BONDING
Introduced by:
(FIN)
AN ACT ESTABLISHING THE FINTECH REGULATORY SANDBOX
PROGRAM AND THE INSURTECH REGULATORY SANDBOX
INITIATIVE.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. (NEW) (Effective July 1, 2022) (a) For the purposes of this 1
section: 2
(1) "Applicable agency" means a department or agency of the state 3
that may regulate the type of financial product or service in the state that 4
comprises an innovative product or service and individuals or 5
companies that provide such financial product or service; 6
(2) "Blockchain technology" means an electronic method for storing 7
data in a decentralized system that (A) uses cryptography to secure such 8
data, (B) is consensus-based, (C) is mathematically verified, and (D) is 9
distributed across multiple locations; 10
(3) "Company" means a corporation or other organized entity with a 11
physical location in the state; 12 Raised Bill No. 482
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(4) "Consumer" means an individual or a company that purchases or 13
otherwise enters into a transaction or agreement to receive a financial 14
product or service; 15
(5) "Cryptocurrency" means a digital currency in which transactions 16
are verified and records are maintained through blockchain technology; 17
(6) "Financial product or service" means (A) a financial product or 18
service that requires licensure or registration under the provisions of the 19
general statutes, or (B) a financial product or service that includes a 20
business model, a delivery mechanism or an element that may require 21
licensure or registration to act as a financial institution, an enterprise or 22
other entity that is regulated under the provisions of title 36a of the 23
general statutes or other related provisions. "Financial product or 24
service" does not include a product or service that is regulated under the 25
provisions of title 38a of the general statutes or chapter 672a of the 26
general statutes; 27
(7) "Innovation" means the use or incorporation of a new or emerging 28
technology or a new use of existing technology, including, but not 29
limited to, blockchain technology, to address a problem, provide a 30
benefit or offer a product, service, business model or delivery 31
mechanism, where such product, service, model or mechanism is not 32
known by the applicable agency to have a widespread offering in the 33
state; and 34
(8) "Innovative product or service" means a financial product or 35
service that includes an innovation. 36
(b) (1) (A) There is established a Fintech Regulatory Sandbox 37
program to allow companies to make an innovative product or service, 38
including products or services related to cryptocurrency, available to 39
consumers temporarily without such companies obtaining a license or 40
other authorization that may otherwise be required. The program shall 41
be overseen by the Innovation Council established under subsection (j) 42
of this section. 43 Raised Bill No. 482
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(B) (i) Notwithstanding any provision of the general statutes, any 44
company that is approved to participate in the program (I) shall be 45
granted a waiver by the applicable agency of any license or other 46
authorization required under the general statutes or regulations 47
adopted thereafter, unless the applicable agency determines that waiver 48
of such licensure or other authorization should not be waived and 49
provides its reasons substantiating such determination to the 50
Innovation Council, and (II) may be granted a waiver by the applicable 51
agency of specified requirements imposed by the general statutes or 52
regulations adopted thereunder that do not currently permit the 53
innovative product or service to be made available to consumers in the 54
state. 55
(ii) Any waiver granted pursuant to subparagraph (B)(i)(II) of this 56
subdivision shall (I) be no more extensive than what is necessary, as 57
determined by the applicable agency, to accomplish the purposes of this 58
section, and (II) be valid for the duration of the program period set forth 59
in subdivision (2) of this subsection and, if applicable, for the period 60
extended pursuant to subdivision (2) of subsection (d) of this section. 61
(iii) Each applicable agency shall provide a list to the Innovation 62
Council of the waivers granted by such agency to each such company. 63
(2) (A) Any company may apply to the Innovation Council to 64
participate in the Fintech Regulatory Sandbox program for a thirty-six-65
month period. A company that is licensed or otherwise authorized in 66
another jurisdiction shall be eligible to apply, provided such company 67
has a physical location in the state. The council shall prescribe the form 68
and manner of the application and the amount of the application fee to 69
be submitted with each application. An applicant shall submit a 70
separate application for each innovative product or service for which 71
the applicant is seeking participation in the program. 72
(B) Each application shall include, but not be limited to, (i) contact 73
information of the applicant, including the legal name, address, 74
telephone number, electronic mail address and Internet web site 75 Raised Bill No. 482
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address, (ii) disclosure of any criminal convictions of the applicant or 76
any employee of the applicant who is substantially involved in the 77
development, operation or management of the innovative product or 78
service, (iii) the information to be considered by the Innovation Council 79
under subdivision (3) of this subsection, and (iv) any other information 80
reasonably necessary for the council to determine an applicant's 81
eligibility for the program. The council shall forward a copy of each 82
application to the applicable agency for such agency's review and 83
recommendation. 84
(3) The Innovation Council shall consider, for each application 85
submitted: 86
(A) The nature of the innovative product or service proposed to be 87
made available to consumers, including any potential risks to 88
consumers; 89
(B) The methods the applicant will use to protect consumers and 90
resolve complaints during the program period; 91
(C) A business plan submitted by the applicant and the availability of 92
capital; 93
(D) Whether the applicant's management has the necessary expertise 94
to conduct a pilot of the innovative product or service during the 95
program period; 96
(E) Whether any officer or director of the applicant who is 97
substantially involved in the development, operation or management of 98
the innovative product or service has been convicted of or is currently 99
under investigation for fraud or a violation of state or federal securities 100
law; 101
(F) Whether the applicable agency has investigated, sanctioned or 102
pursued legal action against the applicant; and 103
(G) Any other factor the council or applicable agency deems 104
necessary to determine whether the applicant or the innovative product 105 Raised Bill No. 482
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or service furthers the goals of the program. 106
(4) The Innovation Council may deny an application for any reason 107
and shall provide specific reasons for the denial to the applicant. Any 108
such applicant may reapply to participate in the Fintech Regulatory 109
Sandbox program, provided the applicant has taken action to address 110
the reasons provided for the denial. Any application approved by the 111
council shall not be against the public interest and shall not 112
unreasonably increase the risk to consumers. 113
(5) The Innovation Council may impose a participation fee on each 114
applicant approved for the Fintech Regulatory Sandbox program and 115
may impose additional fees based on factors such as the size of a 116
company or the number of consumers a company may have, provided 117
any fees imposed under this subdivision shall not be unreasonably high 118
or discourage participation. The council shall determine all applicable 119
fees and shall post such fees on each applicable agency's Internet web 120
site. 121
(c) (1) As a condition of participation in the Fintech Regulatory 122
Sandbox program, an applicant shall agree to submit any employee who 123
is substantially involved in the development, operation or management 124
of the innovative product or service to a criminal history records check. 125
Upon approval of an applicant's application, the company shall have a 126
period of twenty-four months after the date of approval to make the 127
innovative product or service available to consumers, subject to the 128
following conditions: (A) The applicable agency may specify, on a case-129
by-case basis, a maximum number of consumers permitted to receive 130
the innovative product or service, a maximum value amount for a single 131
transaction to a consumer or a maximum aggregate value of 132
transactions to a consumer; and (B) the applicable agency may require 133
the company to execute a surety bond or to deposit cash or marketable 134
securities with such agency, in an amount determined by such agency, 135
as security for potential losses suffered by consumers. Such surety bond, 136
cash or marketable securities shall be cancelled or refunded, as 137
applicable, when any waiver granted to the company under this section 138 Raised Bill No. 482
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has expired or when the applicable agency determines that any 139
consumer claims have been satisfied, whichever is later. 140
(2) Each applicable agency shall establish reporting requirements for 141
program participants, including information about consumer 142
complaints, if any. 143
(3) The Innovation Council shall post on each applicable agency's 144
Internet web site a list of companies that have been approved to 145
participate in the program, the innovative product or service offered by 146
each such company and any waiver granted to such company. 147
(d) (1) Prior to providing an innovative product or service to a 148
consumer, the program participant shall disclose the following to the 149
consumer in a clear and conspicuous format in English and Spanish: (A) 150
The name and contact information of the participant; (B) that the 151
innovative product or service is authorized pursuant to the provisions 152
of this section for a temporary period; (C) that neither the state nor the 153
applicable agency endorses or recommends the innovative product or 154
service and that neither are subject to any liability for losses or damages 155
caused by such product or service; (D) that the consumer may contact 156
the applicable agency to file a complaint regarding the innovative 157
product or service and the contact information for the appropriate 158
applicable agency; and (E) any other statements or additional 159
disclosures that may be required by the applicable agency. 160
(2) Any program participant may request an extension of the 161
program period set forth in subparagraph (A) of subdivision (2) of 162
subsection (b) of this section for an innovative product or service. Any 163
such extension shall require the agreement of both the Innovation 164
Council and the applicable agency that such extension furthers the 165
purposes of this section and there are no unreasonable risks posed to 166
consumers by extending the program period for such product or service. 167
(e) (1) The Innovation Council or the applicable agency may collect 168
personal information that is relevant and necessary to accomplish the 169
purposes of this section, provided such personal information may not 170 Raised Bill No. 482
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be disclosed further without the written consent of the subject of the 171
information. Any documents, materials or other information in the 172
possession or control of the council or the applicable agency that are 173
obtained by, created by or disclosed to the council, the applicable agency 174
or any other person, in the course of review and approval of an 175
innovative product or service under this section shall be confidential by 176
law and privileged, shall not be subject to disclosure under section 1-210 177
of the general statutes, shall not be subject to subpoena and shall not be 178
subject to discovery or admissible in evidence in any civil action in the 179
state. 180
(2) The Innovation Council or the applicable agency may enter into 181
agreements with regulators in other jurisdictions to advance the 182
purposes of the Fintech Regulatory Sandbox program, which 183
agreements may include permission for any program participant to 184
operate in other jurisdictions. 185
(3) (A) The Innovation Council, in consultation with the applicable 186
agency, may terminate a participant's participation in the program at 187
any time and for any reason, provided the council shall provide not less 188
than ten days' notice of such termination to the participant. Any 189
participant whose participation has been terminated pursuant to this 190
subparagraph shall be afforded notice and hearing in accordance with 191
the provisions of chapter 54 of the general statutes, except that any 192
decision of the council after such hearing shall not be appealable under 193
section 4-183 of the general statutes. 194
(B) Any program participant may submit a written request to the 195
council and the applicable agency to exit the program at any time, 196
provided the participant has resolved any consumer complaints and has 197
notified the applicable agency that consumers have not been harmed as 198
a result of the innovative product or service. 199
(f) (1) At the end of the program period or any extension thereof, each 200
participant shall submit a report, in a form and manner prescribed by 201
the applicable agency, to the Innovation Council and the applicable 202 Raised Bill No. 482
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agency. Such report shall include a description of the innovative 203
product or service, the number of consumers to which such product or 204
service was provided and any other information required by the 205
applicable agency. 206
(2) If a program participant cannot obtain approval of the innovative 207
product or service from the applicable agency within ninety days after 208
the date of expiration of the program period, the participant shall wind 209
down its operations with its existing consumers, except that the 210
participant may, with respect to such product or service, (A) collect and 211
receive money owed by a consumer based on any agreement made 212
before the expiration of the program period or any extension thereof, (B) 213
take any necessary legal action, and (C) take such other action that is 214
authorized by the applicable agency. If a program participant has 215
ongoing duties after the expiration of the ninety-day period, the 216
participant shall continue to fulfill only those duties or arrange for 217
another company to fulfill such duties after such expiration date. 218
(3) A contract entered into by a program participant and another 219
party during the program period or any extension thereof, if applicable, 220
shall be governed by its terms and shall not expire or terminate solely 221
on the basis of the expiration or termination of the program participant's 222
participation in the program, unless such provision was included in 223
such contract. A self-executing contract that is entered into and stored 224
through blockchain technology is a valid and enforceable contract for 225
the purposes of this subdivision. 226
(4) Each program participant shall retain, for not less than three years 227
after the expiration of the program period or any extension thereof, all 228
records, documents and data produced in the ordinary course of 229
business regarding the innovative product or service for which 230
participation in the program was approved, and shall make such 231
records, documents and data available to the applicable agency upon 232
written request. 233
(g) Each applicable agency shall adopt regulations, in accordance 234 Raised Bill No. 482
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with the provisions of chapter 54 of the general statutes, to establish an 235
expedited process for program participants to receive a license or other 236
authorization after the completion of the program period or any 237
extension thereof, provided such program participants have resolved 238
any consumer complaints and are otherwise in good standing with the 239
Innovation Council and the applicable agency. 240
(h) (1) A program participant shall be deemed to possess an 241
appropriate license or other authorization under the laws of the state for 242
purposes of any provision of federal law that requires state licensure or 243
authorization. 244
(2) Notwithstanding any provision of this section, no program 245
participant shall be immune from liability for any criminal offense 246
committed during the participant's participation in the program. 247
(i) The Innovation Council may designate nonprofit organizations as 248
partners to assist Fintech Regulatory Sandbox program applicants with 249
the application process and program participants with the design or 250
implementation of innovative products or services during the program 251
period or any extension thereof. Such organizations may explore, 252
receive input on, analyze and make recommendations to the Innovation 253
Council and program applicants and participants, with respect to 254
innovations and applications of innovative technology that would 255
provide benefits to the state, the state's consumers and the state's 256
industries. Any nonprofit organization may apply to the council, in such 257
form and manner prescribed by the council, for approval to serve as a 258
partner. 259
(j) (1) There is established an Innovation Council to support 260
innovation, investment and job creation within the state by encouraging 261
and promoting participation in the Fintech Regulatory Sandbox 262
program. The Innovation Council shall be within the Department of 263
Banking for administrative purposes only and shall consist of the 264
following members: 265
(A) The Banking Commissioner, or the commissioner's designee; 266 Raised Bill No. 482
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(B) The Commissioner of Economic and Community Development, 267
or the commissioner's designee; 268
(C) The Attorney General, or the Attorney General's designee; 269
(D) One member of the public appointed by the speaker of the House 270
of Representatives and one member of the public appointed by the 271
president pro tempore of the Senate, each of whom has entrepreneurial 272
expertise or expertise in financial products or services, blockchain 273
technology or cryptocurrency; 274
(E) One member of the public appointed by the majority leader of the 275
House of Representatives and one member of the public appointed by 276
the majority leader of the Senate, each of whom is a member of 277
academia; 278
(F) One member of the public appointed by the minority leader of the 279
House of Representatives and one member of the public appointed by 280
the minority leader of the Senate, each of whom has a background in 281
entrepreneurship expertise or expertise in financial products or services, 282
blockchain technology or cryptocurrency; and 283
(G) Two members of the public appointed by the Governor, each of 284
whom has a background in entrepreneurship expertise or expertise in 285
financial products or services, blockchain technology or cryptocurrency. 286
(2) All initial appointments to the Innovation Council shall be made 287
not later than September 1, 2022, and shall terminate on August 31, 2024, 288
or August 31, 2026, as applicable, regardless of when the initial 289
appointment was made. 290
(3) Members first appointed shall have the following terms: (A) One 291
member appointed by the Governor, one member appointed by the 292
speaker of the House of Representatives and one member appointed by 293
the president pro tempore of the Senate shall initially serve a term of 294
two years; and (B) the remaining appointed members shall initially 295
serve a term of four years. Appointed members shall serve a term of four 296 Raised Bill No. 482
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years thereafter and may be reappointed but shall not serve more than 297
two consecutive terms. Any vacancy shall be filled by the appointing 298
authority. Any vacancy occurring other than by expiration of term shall 299
be filled for the balance of the unexpired term. 300
(4) Notwithstanding any provision of the general statutes, it shall not 301
constitute a conflict of interest for a trustee, director, partner, officer, 302
stockholder, proprietor, counsel or employee of any company, or any 303
individual having a financial interest in a company, to serve as a 304
member of the Innovation Council, provided all appointed members of 305
the Innovation Council shall be deemed public officials and shall adhere 306
to the code of ethics for public officials set forth in chapter 10 of the 307
general statutes, except that no appointed member shall be required to 308
file a statement of financial interest as described in section 1-83 of the 309
general statutes. 310
(5) The Governor shall appoint the chairperson of the Innovation 311
Council from among the members set forth in subparagraphs (A) to (C), 312
inclusive, of subdivision (1) of this subsection. The chairperson shall 313
schedule the first meeting of the Innovation Council, which shall be held 314
not later than October 1, 2022. At such meeting, the Innovation Council 315
shall elect a vice-chairperson from among the appointed members. 316
(6) A majority of the Innovation Council shall constitute a quorum for 317
the transaction of any business. 318
(7) The appointed members of the Innovation Council shall serve 319
without compensation, but shall, within the limits of available funds, be 320
reimbursed for expenses necessarily incurred in the performance of 321
their duties. 322
(8) The Department of Banking shall provide administrative support 323
to the Innovation Council. 324
(k) (1) The Innovation Council shall have the following powers and 325
duties: 326 Raised Bill No. 482
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(A) Set standards, principles, guidelines and policy priorities for the 327
types of innovations the Fintech Regulatory Sandbox program will 328
support; 329
(B) Help publicize and encourage participation in the Fintech 330
Regulatory Sandbox program; 331
(C) Obtain from any executive department, board, commission or 332
other agency of the state such assistance and data as necessary and 333
available to carry out the purposes of this section; 334
(D) Verify applicant eligibility for the program with applicable 335
agencies, review applications for participation in the program and work 336
collaboratively with applicable agencies to oversee the program and its 337
participants; 338
(E) Explore, receive input on, analyze and make recommendations 339
with respect to blockchain technology and cryptocurrency initiatives 340
and applications of blockchain technology that would provide benefits 341
to the state, the state's consumers and the state's industries; 342
(F) Limit, to the extent practicable, the amount of risk exposure from 343
the products and services offered under the program and establish 344
safeguards to protect consumers; and 345
(G) Perform such other acts as may be necessary and appropriate to 346
carry out the duties described in this section. 347
(2) The Innovation Council may establish bylaws to govern its 348
procedures. 349
(l) Not later than January 1, 2024, and annually thereafter, the 350
Innovation Council shall submit a report, in accordance with the 351
provisions of section 11-4a of the general statutes, to the Governor and 352
the joint standing committees of the General Assembly having 353
cognizance of matters relating to banks, commerce and finance, revenue 354
and bonding on the Fintech Regulatory Sandbox program, which shall 355
include, but need not be limited to, (1) the number of applicants to the 356 Raised Bill No. 482
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program in the preceding calendar year, (2) the number of program 357
participants in the preceding calendar year, (3) a description of each 358
innovative product or service made available to consumers through the 359
program, and (4) any recommendations for policy or legislative changes 360
to improve or expand the program or to administer the program more 361
efficiently. 362
Sec. 2. (NEW) (Effective July 1, 2022) (a) Notwithstanding any 363
provision of the general statutes, the Insurance Commissioner, in 364
consultation with the CTNext board of directors, shall establish an 365
Insurtech Regulatory Sandbox initiative to facilitate the development of 366
new technologies and types of insurance for start-up insurance 367
companies that do not have the capital or labor resources to comply with 368
the insurance requirements of the state. Such initiative shall begin to be 369
implemented not later than January 1, 2023. Such initiative shall: 370
(1) Establish conditions for participating in the initiative and provide 371
for an application process for new companies to be accepted into the 372
initiative. The commissioner shall accept all applicants that meet such 373
conditions, except that the commissioner may limit in the first two years 374
of the initiative the number of companies allowed to participate in the 375
initiative; 376
(2) Provide that the commissioner shall waive the requirement to be 377
licensed in the state for participating companies; 378
(3) Establish a light regulatory framework of only the requirements 379
the commissioner deems crucial to impose on participating companies 380
to protect consumers; 381
(4) Designate an employee or employees to exclusively oversee and 382
manage the administration of the initiative; 383
(5) Permit consumers in the state to purchase products offered by 384
participating companies while ensuring that such consumers are aware 385
that such products are offered under reduced regulatory oversight; 386 Raised Bill No. 482
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(6) Establish the maximum number of policyholders or named 387
insured or customers and the maximum amount of risk exposure each 388
participating company may have. The commissioner may specify the 389
demographics that each such company may serve, so as to protect 390
consumers who are least able to make informed choices about insurance 391
products and understand the relevant risks of a product offered by such 392
company; 393
(7) Ensure the initiative is structured to match the pace of product 394
offerings and the growth of participating companies, including allowing 395
for more rapid product testing and product adjustments on a weekly or 396
more frequent basis; 397
(8) Allow participating companies to remain in the initiative for an 398
initial period of thirty-six months. The commissioner may establish 399
conditions to allow for an extension of such period; 400
(9) Establish clear steps participating companies shall meet to 401
demonstrate such company's product or service is viable and can be 402
made available to the wider market; and 403
(10) Establish reporting requirements for participating companies. 404
(b) The commissioner may remove a participating company from the 405
Insurtech Regulatory Sandbox initiative at any time if the commissioner 406
determines there is an unreasonable risk to policyholders or customers 407
of such company. 408
(c) Not later than January 1, 2024, and annually thereafter, the 409
commissioner shall submit a report, in accordance with the provisions 410
of section 11-4a of the general statutes, to the joint standing committees 411
of the General Assembly having cognizance of matters relating to 412
insurance, commerce and finance, revenue and bonding, summarizing 413
the number of participating companies in the Insurtech Regulatory 414
Sandbox initiative, any products or services such companies offer, any 415
products or services that have been deemed to be viable or offered to 416
the wider market, any participating companies that have established 417 Raised Bill No. 482
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themselves in the state and become licensed insurance companies, and 418
any other information the commissioner deems relevant. 419
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2022 New section
Sec. 2 July 1, 2022 New section
Statement of Purpose:
To establish a regulatory sandbox program and initiative for innovative
financial and insurance products and services.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]