SEC Launches Strategic Sandbox (Stratbox)

The Securities and Exchange Commission (SEC) released Memorandum Circular No. 9, series of 2024 outlining the launch of a regulatory sandbox, its objectives, scope of allowed activities, evaluation criteria, and respective approval process, among other details. 




In launching the sandbox, the SEC recognized the importance of technology and how it “may maximize value, increase efficiency, manage risks better, and improve the lives of Filipinos[.]” Thus, it aims to establish the sandbox to allow relevant stakeholders to “explore innovation, test their product or services in a live setting, and eventually adopt the technology to develop a richer financial market” that will allow regulators to craft and refine policies and “stimulate the development of a vibrant and inclusive digital economy[.]”




It defined the sandbox as “a regulatory tool that will enable a sandbox participant to test its innovative product or service or a new business model in a live and controlled environment, within a defined period.” Participants may be granted the necessary waivers and modifications to exempt them from existing laws and rules depending on the risk and security measures. The SEC may also “modify or relax specific licensing, registration, compliance, or other regulatory requirements that would otherwise apply to the Sandbox Participant’s innovative activities during the sandbox period.”


Some of the evaluation criteria enumerated are that the product or service must include innovative technologies; must not be prohibited under Philippine law; is scalability; has the capacity to test the product or service; discloses its financing, testing plans, key performance indicators, limitations, risk assessments and management guidelines, and an exit strategy.



The SEC will then evaluate the application based on the criteria. If approved, a participant may proceed with the testing and experimentation phase but must “notify its customers that it is operating in a sandbox and disclose the risks associated with the innovative product or service. An acknowledgment from each of the customers is also required to ascertain that they have read the terms and conditions of the product or service and that they understood the risks involved in the innovation.”


At the end of the testing period, the sandbox is terminated. But during any stage of the process, the SEC may also terminate the sandbox due to the following reasons: lack of protection measures, doubts about the purpose, non-compliance with requirements, unresolved risks or flaws, breach of testing plan, or the participant’s voluntary exit. 


The participant may also apply for an extension at least 30 days before the expiration of the testing period and provide the reason for the extension.



Upon the conclusion of the sandbox period, the participant “shall submit a report summarizing the activities, analysis of outcomes, evaluation viability of the product or service, and recommendations for the design of new regulations or amendments to policy.” Afterwards, the  SEC shall determine the eligibility of the participant’s graduation from the sandbox. Graduates may thereafter “formally submit to the SEC an application for the required license to offer the financial product or service to the public at large, with the endorsement of the Sandbox Committee through the completion certificate, subject to the issuance of special rules allowing the registration of the said activity.”


The SEC is committed to aiding sandbox participants in achieving scalability and sustainability and shall establish processes that facilitate a seamless transition from the sandbox to full deployment. It will provide guidance and support to assist participants in navigating potential new regulatory requirements necessary to support their solutions. 

The full Memorandum Circular can be found here.

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