Following its announcement last month that it would consider creating a "regulatory sandbox" as part of its innovation hub, the Australian Securities and Investments Commission has released a consultation paper (CP 260) outlining its plans to give innovative financial start-ups greater flexibility.The idea of a sandbox is to provide licensing exemptions and other regulatory flexibility for new businesses, allowing them to run tests and trials of their businesses before moving into full start-up mode.ASIC said it recognised that start-up businesses face a couple of problems when dealing with regulators: the regulatory process slows their speed to market; and they may lack required organisational competence to provide a financial service.One option the regulator is considering is allowing some businesses to rely on a sign-off from a third party to meet their organisational competence obligation. This would allow costs associated with hiring responsible managers to be deferred.ASIC said such an option would be appropriate for small-scale heavily automated businesses, where fewer day-to-day decisions would have to be made.Another option is to allow new businesses to test certain financial services for six months without holding an Australian Financial Services Licence. This would allow start-ups to gain certainty about their business model before going further.The licensing exemption would only be available if the start-up was sponsored by a "sandbox sponsor".ASIC is also proposing to provide additional guidance about the way it assesses submissions about a responsible manager's knowledge and skills.ASIC said the options in the consultation paper were not its final policy and it has asked for feedback.The chief executive of the fintech hub Stone & Chalk, Alex Scandurra, said the proposals would help reduce the time and costs need to commercially launch a fintech product or service."ASIC's proposal to provide conditional industry-wide relief to allow Australian fintech start-ups to access this sandbox is a potential game changer," Scandurra said.ASIC set up an innovation hub last year to assist fintech start-ups navigate through the regulatory regime. It has also established a digital advisory committee to take expert advice on the issue.In its first year of operation ASIC's innovation hub has participated in a range of other fintech initiatives, such as other hubs and fintech "meetups". It has worked with 80 entities, advising them on regulatory issues.It has put together an internal taskforce to work on new business models and established the Digital Finance Advisory Committee - a consumer, academic and fintech industry body that gives ASIC feedback.