MVA Litigation

As home to the second largest banking center in the country, North Carolina has stepped onto the leading edge of innovation in the FinTech and InsurTech arenas. Late last year, Governor Cooper signed into law H624, the North Carolina Regulatory Sandbox Act of 2021  (“Sandbox Act”), which established what is known as a “regulatory sandbox” program to encourage innovation in the development of FinTech and InsurTech products to be offered to consumers. The regulatory sandbox program provides a modified regulatory environment in which companies can have licensing or other regulatory requirements temporarily waived in order to “test an innovative financial or insurance product or service and make it available to consumers on a limited basis.” The Sandbox Act also established the North Carolina Innovation Council (“Innovation Council”) to implement the program, with the goal of facilitating "innovation, investment and job creation in North Carolina." By treading into the regulatory sandbox, North Carolina has joined fewer than a dozen states that have used the tool to date.

The North Carolina legislature established the regulatory sandbox program in a bipartisan effort, finding that “existing legal and regulatory frameworks are restricting innovation because these frameworks were established largely at a time when technology was not a fundamental component of industry ecosystems, including banking and insurance.” The program will provide participants with a waiver from certain regulations for up to 24 months, unless extended under the terms of the statute.

The Sandbox Act gives the Innovation Council the authority to determine the guiding principles, standards and policy priorities for the kinds of innovations that will qualify for the program, as well as the responsibility to handle program admissions. The Act seeks to balance the need for a relaxed regulatory environment to spur innovation with the requirement that the Innovation Council consider several factors before admitting an applicant to the program, including the nature of the product or service proposed and the potential risk to consumers, how consumers will be protected and have their complaints addressed, and the company’s expertise and ability to execute a test of the innovative product.

The membership of the Innovation Council has taken shape, with the most recent appointment of Agnes Gambill West by Lieutenant Governor Mark Robinson’s on January 29, 2022. Gambill West is Co-Chair of the North Carolina Blockchain Initiative, and joins the following additional individuals who have been appointed to serve on the council:

• Lawrence G. Baxter, the David T. Zhang Professor of the Practice of Law at the Duke University School of Law and an entrepreneurial and professional consultant with Strategic Catalytics LLC – appointed by Governor Cooper
• Vijay Srinivasan, Senior Vice President for CGI – appointed by Governor Cooper

• Doug Hague, founding Executive Director of the UNC School of Data Science – appointed by the N.C. General Assembly
• Stephanie Castagnier Dunn - appointed by the N.C. General Assembly
• Tariq Bokhari, Charlotte City Councilman and Founder, Carolina Fintech Hub - appointed by the N.C. General Assembly
• Leobardo Diosdado, Western Carolina University - appointed by the N.C. General Assembly

Also sitting on the council is Commissioner of Banks Katherine Bosken or an appointed designee, Commissioner of Insurance and Fire Marshal Mike Causey or an appointed designee, the Secretary of State Elaine Marshall or an appointed designee, and Attorney General Josh Stein or an appointed designee.

Charlotte has been described as being primed to take advantage of the FinTech industry due to the city’s “growing population, young and talented workforce and innovative spirit….” The driving force of innovation coupled with the guidance of wise legal counsel can lead to the successful realization of the potential that technology holds. At Moore & Van Allen, we deploy a multi-disciplinary approach to counseling our clients whose industries and business operations are centered around or impacted by modern and emerging technologies. Our attorneys have the depth and breadth of experience to navigate clients through technology-related matters involving fintech, regulatory and compliance issues, intellectual property, cybersecurity and data privacy, M&A and other transactions, and high-stakes disputes and litigation implicating these areas. Feel free to contact us with any questions on how we may assist you. We will keep you posted on developments regarding the NC regulatory sandbox program and Innovation Council.