SEBI Relaxes Regulations For Stock Brokers In GIFT City

SUMMARY

In a circular, SEBI said that stock brokers looking to offer their services can do so under a separate business unit (SBU) of the stock broking entity itself

Till now, it was mandatory for stock brokers to obtain an NOC from SEBI to set up subsidiaries or form JVs to offer such activities in GIFT-IFSC

GIFT-IFSCA will be responsible for matters related to policy, eligibility criteria, risk management, investor grievances, inspection, enforcement, and claims for these SBU

With an eye on spurring the ease of doing business in Gujarat International Finance Tec-City (GIFT), SEBI today exempted regulated stock brokers from seeking prior approval before undertaking “securities market-related activities” at the International Financial Services Centre (IFSC).

In a circular, the market regulator said that stock brokers looking to offer their services can do so under a separate business unit (SBU) of the stock broking entity itself. “These activities can also be carried out if the branch qualifies as an SBU,” SEBI added, without elaborating further.

The regulator said that the existing practice of carrying out securities-market related activities in GIFT-IFSC through a subsidiary will also be allowed.

Prior to this, it was mandatory for stock brokers to obtain a no objection certificate (NOC) from SEBI to set up subsidiaries or form joint ventures (JVs) to offer such activities in GIFT-IFSC.

“The matters related to policy, eligibility criteria, risk management, investor grievances, inspection, enforcement, claims etc.for SBU in GIFT-IFSC would be specified under the regulatory framework issued by the concerned regulatory authority and all activities of the SBU in GIFT-IFSC would be under the jurisdiction of that regulatory authority,” said SEBI in the circular.

Besides, the regulator also underlined key safeguards to demarcate the regulatory obligations of stock brokers:

Stock brokers will have to ensure that the 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 will have to be maintained
The SBU will only be allowed to offer securities market related services permitted by the IFSC authority
Stock brokers will have to 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

SEBI also underscored that the regulator’s grievance redressal mechanism will not be available to the investors availing the services of the SBU as such units will come under the jurisdiction of a separate regulatory authority.

Meanwhile, stock brokers, which have already floated a subsidiary or entered into a joint venture (JV) to undertake activities in the IFSC, will have the option to dismantle the entities at their discretion.

This comes a month after the market regulator floated a consultation paper to seek feedback on removing the requirement of NOC to offer services at the IFSC.

This is part of the Centre’s larger plan to turn GIFT City into a thriving financial hub. This also builds on finance minister Nirmala Sitharaman’s comments last year that Indian companies will soon be able to list their stocks directly in the GIFT City and access global funds easily.

As per the Economic Survey 2024-25, 60 entities were registered as fintechs in GIFT-IFSC as of September 2024.