15-10-2022
1. How to set up a FINTECH in Colombia. What corporate and special requirements should I meet?
Although Colombian regulations do not provide an explicit definition for a Fintech Company, in general terms, this refers to those companies whose corporate purpose is to develop or apply technology-based innovations in the provision of financial, stock exchange or insurance services, which result in new business models, applications, processes or products.
Regarding the legal regime applicable to the constitution of one of such companies, the following must be considered. In the case of a Fintech company that intends to carry out financial, stock exchange, or insurance activities and any other related to the management, use or investment of resources collected from the public, it must obtain prior authorization from the Financial Superintendence of Colombia (Superintendencia Financiera de Colombia-SFC), a technical body that exercises the inspection, surveillance and control over the persons who carry out such activities. Regarding the social form that the financial institutions supervised by the SFC must adopt, the article 53 prescribes in its numeral 1 that they (…) “shall be constituted in the form of anonymous joint-stock companies or cooperative associations”.
Likewise, it should also be noted that for the incorporation of an entity supervised by the SFC, the accreditation of a minimum capital is required. However, in the case of a Fintech company that carries out a different activity from those entities supervised by the SFC, its incorporation must be governed by the general and special rules applicable to the legal nature of the activity.
2.Fintech regulatory framework
- Crowdfunding
In 2017 and attending to one of the most developed areas worldwide, the URF initiated a normative project to establish crowdfunding in Colombia, as a mechanism highlighted for its potential to expand the sources of financing for small and medium sized companies. Through the regulated framework, the productive projects may be financed for up to fifty-eight thousand (58,000) 3 minimum monthly legal salaries, and the investors may allocate up to 20% of their annual income or equity to this type of financing in the case of non-qualified investors.
- Investments by Credit Establishments, financial services companies and capitalization companies, in the capital of innovation and financial technology companies.
On the other hand, in 2018, the interest of the traditional financial sector and the Fintech industry was gathered to make alliances to generate benefits for their current and potential clients. As a result, in December 2018 Decree 24434 was enacted, authorizing credit establishments to invest capital in innovation companies. The use of technological tools in relationships with the client was authorized to carry out the activity, to open spaces for innovation in the contact between securities intermediaries and investors, as well as to generate efficiencies in the execution of advisory services.
- Regulatory Sandbox
The entities that intend to provide financial services typical of the entities supervised by the SFC, through innovative technological developments, will be subject to a series of requisites and requirements of a prudential nature for their constitution, including a minimum amount of capital. Likewise, for their operation, they must previously obtain a temporary operation certificate issued by the SFC.
Innovative technological developments may be temporarily implemented for the provision of such operations of the entities supervised by the SFC. The request for incorporation to operate temporarily must be submitted to the Financial Superintendence of Colombia by the interested parties and must include at least the following:
1）The project of the bylaws and the request of constitution for temporary operation.
2）Specific characteristics of the innovative technological development, specifying how they relate to the purposes.
3）Business model, definition of the proposed financial product or service, business feasibility, goals.
4）Tools or technological resources that may be used.
5）Identification of the prudential requirements, including the minimum, operational and risk management capital that need to be softened, the proposal of the differentiated prudential conditions, requisites and requirements applicable to the tests, together with a justifying analysis of the need and proportionality of that flexibility in accordance with the business model.
6）Policies and procedures that the entity will apply for the management, administration and disclosure of situations that generate conflicts of interest.
7）The proposal of risk analysis and management policies for financial products and services that use innovative technological developments that are intended to be tested.
8）Identification of the activities that are intended to be carried out in the controlled test space and the objectives that are intended to be met.
9）The legal provisions that regulate the financial activity that obstruct the development of products or services, if applicable.
10）Metrics and indicators for the evaluation of the proposed objectives.
11）The target market and maximum number of financial consumers to whom the product or service in question would be offered, specifying the respective geographic location.
12）The maximum amount of resources that it proposes to capture from each financial consumer, as well as the maximum total amount that it may receive during the validity of its temporary operation certificate, if applicable.
13）Proposed test term and schedule.
14）The way in which it intends to inform and obtain the consent of its financial consumers regarding the fact that the financial products and services offered are part of a controlled test space, as well as the risks to which they are exposed.
15）Proposal for a transition, clearance or adjustment plan.
16）The proposal of the measures that will be adopted to achieve the protection of its financial consumers, according to the level of risk of the temporary test.
17）Other information that the Financial Superintendence of Colombia determines.
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