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Currently, stock brokers are mandated to obtain a no objection certificate (NOC) from SEBI to operate from GIFT-IFSC
In its consultation paper, SEBI has proposed scrapping the NOC requirement and allowing stock brokers to conduct securities market related activities under a separate business unit (SBU)
However, stock brokers must ensure that activities of SBU in GIFT-IFSC are segregated and ring-fenced from their Indian securities market related activities
SEBI is considering doing away with the requirement for stock brokers to get specific approval from the markets regulator to operate from the International Financial Services Centre (IFSC) in GIFT city.
Under the existing rules, it is mandatory for stock brokers to obtain a no objection certificate (NOC) from SEBI to set up subsidiaries or form joint ventures (JVs) to conduct securities market related activities in GIFT-IFSC.
In a consultation paper, the markets regulator has proposed ending the NOC requirement for stock brokers and allowing them to operate from GIFT city under a separate business unit (SBU).
“In order to ensure ease of doing business and to leverage the existing infrastructure of the stock brokers, it is proposed that stock brokers may offer these services under a separate business unit (SBU) of the stock broking entity itself on an arms-length basis. Accordingly, the requirement for stock brokers to obtain approval (NOC) from SEBI to float subsidiary/joint venture in GIFT-IFSC may be done away with,” SEBI said.
Easing Regulations To Increase GIFT City’s Appeal: SEBI has further proposed that stock brokers who have already received NOC from it for operating a subsidiary or JV in GIFT-IFSC “may dismantle” such subsidiary or JV and carry out securities market related activities under an SBU of the stock broking entity itself.
The markets watchdog has proposed the following guidelines to ring fence the activities of stock brokers in the Indian securities market and that of SBU in GIFT-IFSC:
- Stock brokers shall ensure that securities market related activities of the SBU in GIFT-IFSC are segregated and ring-fenced from the Indian securities market related activities of the stock broker and arms-length relationship between these activities are maintained.
- Such SBU in GIFT-IFSC shall be exclusively engaged in providing securities market related activities in GIFT-IFSC only.
- Stock brokers shall prepare and maintain a separate account for the SBU on an arms-length basis.
- The net worth of the SBU shall be kept segregated from the net worth of the stock broker in the Indian securities market. Net worth criteria for a stock broker should be satisfied after excluding the account of the SBU.
SEBI has solicited feedback from the public on its proposal. Comments and suggestions can be submitted till April 11, 2025.
Making GIFT A Global Financial Hub: This comes at a time when the Centre is taking several initiatives to position GIFT as an international financial services hub.
As per the Economic Survey 2024-25, 60 entities were registered as fintechs in GIFT-IFSC as of September last year. Amid India’s push to become a global fintech leader, tech giants Infosys and Wipro are setting up fintech hubs in the GIFT city.
Finance minister Nirmala Sitharaman said last year that Indian companies will soon be able to list their stocks directly in the GIFT city, which would allow them to access global funds easily.
In June last year, Chennai-based VC firm Unifi Capital, through its subsidiary Unifi Investment Management LLP (UIML), launched two new funds, Rangoli India Fund and G20 Portfolio, in GIFT city to tap global investment opportunities.
