Tag Archives: IFSCA

fee structure for DP in IFSC

IFSCA circular dated 27th July, 2021 laying down fee structure for setting up a Depository Participant in the IFSC GIFT City.

  1. The depository participants have been permitted to operate in GIFT-IFSC in terms of the applicable provisions under SEBI (International Financial Services Centres) Guidelines, 2015, as amended from time to time.
  2. The fee structure for Depository Participants in GIFT-IFSC shall be as follows:
    i. Application fee of USD 500 at the time of application for registration;
    ii. Registration fee of USD 2,500;
    iii. Fee of USD 2,500 every five years post registration.
  3. The fees shall be remitted to the following account of IFSCA:
    Account Name: International Financial Services Centres Authority
    Account Number: 970105000174
    Type of Account: USD Current Account
    SWIFT Code: ICICINBBIBU
    NOSTRO Details: BOFAUS3N, Bank of America, N.A., New York Branch, A/c no: 6550491848

Leave a comment

Filed under securities laws

certificate of deposits

The IFSCA has issued guidelines for issue of certificates of deposits by Banking Units situated inside the IFSC. Salient features are as follows:

Certificate of Deposit (CD) is a negotiable instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a BU for a specified time period.

  1. IBUs may issue CDs denominated in any freely convertible foreign currency.
  2. Minimum amount of a CD should be USD 2500 or equivalent in any freely convertible foreign currency.
  3. BUs may issue CDs to persons resident in India and persons resident outside India. Issuance of CDs to persons resident in India shall be subject to the provisions of the Foreign Exchange Management Act, 1999.
  4. The maturity period of CDs issued by BUs should not be less than 7 days and not more than one year, from the date of issue. There shall be no lock-in period for the CDs other than the minimum maturity period.
  5. IBUs may issue CDs at a discount on face value or on the basis of fixed or floating coupon rate. In case of CDs issued on floating rate basis the methodology of compiling the floating rate should be objective, transparent and market based. The BU is free to determine such discount / coupon rate.
  6. IBUs have to maintain appropriate reserve requirements, i.e., Retail Deposit Reserve Ratio (RDRR) on the issue price of the CDs issued to individuals.
  7. CDs may be issued in physical form or in demat form.

  1. CDs in physical form are freely transferable by endorsement and delivery. CDs in demat form can be transferred as per the procedure laid down by the depository.
    10.IBUs shall clearly inform subscribers that the CDs issued by them are not covered by Deposit Insurance and also that the lender of Last resort (LOLR) facility is not available in IFSC.
    11.IBUs shall not grant loans against CDs.
    12.IBUs are permitted to buyback CDs before maturity. Buyback of CDs can be made only 7 days after the date of issue of the CD
    13.Since CDs are transferable, the physical certificates may be presented for payment by the last holder. BUs shall take necessary precautions to verify the chain of transfers and make payment only by credit to the account of the presenter held with them or with another BU or with the branch of a bank outside IFSCA. In case of payment to an account held in another BU or with the branch of a bank outside IFSCA, the BU shall obtain complete details of the payee and such bank accounts and keep them on record.
    14.IBUs shall provide any information/ data or statement that may be called for by the Authority.

Leave a comment

Filed under banking laws

AIFs in IFSC

Circular issued by IFSCA dated 25th June, 2021 allowing further relaxations in AIF operations in IFSC. The salient features are as follows:

A. Continuing interest by the Manager or Sponsor in the AIF
In order to facilitate relocation of funds established or incorporated or registered outside India to IFSC, the continuing interest requirement by the Manager or Sponsor in the AIF provided under para 8 of the Annexure to the operating guidelines for AIFs in IFSC dated November 26, 2018 shall be voluntary.
B. Investment in Mutual Fund
An AIF in IFSC is permitted to invest in units of schemes launched by mutual fund regulated in FATF compliant jurisdiction (including India).

https://ifsca.gov.in/Viewer/Index/192

Leave a comment

Filed under securities laws

merchant bankers in IFSC

IFSCA has vide its circular dated 25th June, 2021 laid down the fee structure for merchant bankers to operate in IFSC.

They are as follows:

a)Application fee of USD 1,000;

b)One-time registration fee of USD 25,000 for new registration;

c)Fee of USD 25,000 every three years post registration.

https://ifsca.gov.in/Viewer/Index/191

Leave a comment

Filed under securities laws

negotiated large trade facility

IFSCA has vide its circular dated 22nd June, 2021 introduced a concept of negotiated large trade (NLT) facility in the stock exchanges situated in IFSC i.e. at GIFT City, Ahmedabad. The facility is applicable only for derivatives on its stock exchanges. The salient features of this facility is given below:

a) The NLT Window shall be open throughout normal trading hours of the stock exchanges.
b) The orders placed shall be within +/- 1% of the applicable Reference price. The Reference price shall be the Volume Weighted Average Price (VWAP) of trades executed in the 30 minutes preceding the NLT order execution.
c) The minimum order size in terms of notional value, for execution of trades, shall be USD 1 million.
d) The NLT transactions shall not be considered for calculation of the daily Open, High, Low, Close (OHLC), VWAP or Daily Settlement Price (DSP) or the Final Settlement Price (FSP) of the derivatives contract for which the transaction has been executed.
e) The NLT trades on behalf of clients shall not be executed against the trading member’s own account. The Trading Members shall execute NLT trades on behalf of their clients only after obtaining explicit written consent from their respective clients.
f) The position limits applicable to the normal market shall be applicable to the NLT window.
g) The Stock Exchange shall ensure that all appropriate trading and settlement practices as well as surveillance and risk containment measures as applicable to the normal trading segment are made applicable and implemented with respect to the NLT window.
h) The Stock Exchange shall disseminate details of the NLT trades to the public on the same day, after the market hours.

Copy of the circular can be found at the IFSCA site https://ifsca.gov.in/Circular

Leave a comment

Filed under Uncategorized

ancillary services at IFSC

IFSCA has vide its circular dated 10th June, 2021 clarified certain aspects relating to enabling ancillary services to be provided at IFSC Gift City, Ahmedabad. These ancillary services pertain to legal, compliance, secretarial, book keeping, auditing, accounting, taxation, professional & management consultancy, asset management, trusteeship etc. The earlier circular issued on 10th February, 2021 laid down certain parameters to be followed by entities wishing to register themselves at IFSC in order to provide ancillary services. Some changes have been made in these conditions, such as:

  1. In Eligibility Conditions it is clarified that the entities may be set up in the form of a company, LLP or registered partnership or their branch or any other form as may be approved by the IFSCA;
  2. In the case of service recipients i.e. entities registered in IFSC, it has been modified to provide that services can be provided to entities from foreign jurisdictions for various permissible ancillary services. Hitherto it was mentioned as “financial service entities from foreign jurisdictions” now the word “financial service” has been removed, so any entities from foreign jurisdictions who are established in IFSC are entitled to receive the permissible ancillary services;
  3. Annexure I to the circular of February, 2021 gives a detailed list of ancillary activities that can be carried out in the IFSC. To that has been added the following in the category of Professional Services viz.

(d) Advisory and Facilitation Services to entities in IFSC/outside India in relation to their capital raising activities outside India.

e) Advisory and Facilitation Services to entities in IFSC/outside India in relation to their merger & acquisition or capital restructuring activities outside India.

4. In Trusteeship services category, following has been provided viz.

Services such as Trusteeship for AIFs, InvIT and REIT, Security Trustee and other related financial services such as escrow agent.

Earlier this clause provided for trusteeship services in relation to debentures, bonds, management of private trust, external commercial borrowing, facility & escrow agent, safe keeping and other related financial services. Now all these have been substituted with the above services.

Further it has been provided that the applicants shall not take client assets, including money, directly or indirectly in its custody and shall only provide permissible services as enumerated in these circulars. It would be better if IFSCA codified these guidelines properly into regulations instead of keeping on amending the circulars like income tax does.

Further if the applicants are undertaking activities of debenture trustee, investment advisor, AIF, fund management etc. then they are required to take registrations separately for each category of service being provided. This i think is a bit onerous from the compliance point of view.

Copies of these circulars can be found on the IFSCA site.

Leave a comment

Filed under Uncategorized

fee structure for IFSC insurance intermediaries

IFSCA circular dated 24th May, 2021 laying down the fee structure for setting up/ registration of insurance intermediaries in IFSC at GIFT City, Ahmedabad. Read on.

Leave a comment

Filed under insurance

fee structure IFSC insurance offices

IFSCA circular dated 24th May, 2021 laying down the fee structure for insurance offices in International Financial Services Centre. Details as follows.

a) Application Fee: USD 1000 (USD One thousand only);
b) Registration Fee: One-time non-refundable fee of USD 5000 (USD Five
thousand only);
c) Annual Fee: USD 5000 (USD Five thousand only);
d) Turnover fee: USD 6,500 (USD Six thousand five hundred only) or onetwentieth of one percent of the total gross premium written by the IIO,
whichever is higher.

  1. Periodicity for payment of Annual Fee and Turnover fee:
    a) The applicable Annual Fee for every financial year shall be paid within 30 days from the beginning of the financial year; and
    b) The applicable Turnover Fee for every financial year shall be paid on or before 30th day of September of the succeeding financial year.
  2. Manner of payment of fee:
    The fee mentioned in this Circular shall be remitted to the following bank account of the Authority (as per details available in the circular)
  3. The above fee structure is applicable with effect from 01st day of October 2020 and the fee is payable on financial year basis.
  4. The Annual fee for Financial year 2020-21 and 2021-22 shall be paid within one month of issuance of this Circular.
  5. The Annual fee and Turnover fee for Financial year 2020-21 shall be paid on prorata basis.

https://ifsca.gov.in/Viewer/Index/177

Leave a comment

Filed under Uncategorized

distribution of mutual funds/ insurance – IFSC

IFSCA has issued a circular dated 3rd May, 2021 giving guidelines to Finance Company/ Finance Unit in IFSC for distribution of mutual funds and insurance products. Read on.

  1. This circular shall apply to all FC/FU as the case may be, registered with the Authority under section 3 of IFSCA (Finance Company) Regulations, 2021 and who intends to undertake the above mentioned activities. Further, the circular shall remain applicable as amended by the Authority from time to time.

B. General Guidelines:

  1. The following guidelines shall be adhered to for undertaking activities as specified in the circular:
    (i) The activities shall be carried out on fee basis, without any risk participation.
    (ii) All employees dealing with mentioned activities shall possess the requisite qualification as per industry best practices. There shall be a system of continuous development and training (internal as well as external) of such employees so that they may understand the complexity of the product.
    (iii) There shall be standardized system of assessing the need/ suitability of products for a customer and the process of initiation/ transaction as well as the functions of the marketing and operational staff shall be segregated.
    (iv)There shall be a Board approved policy encompassing the model of distribution such investment products to be adopted, issues of customer appropriateness, suitability, customer compensation, grievance redressal arrangements and marketing and distribution of such products (which shall, inter alia specifically consider the issue of addressing mis-selling).
    (v) The FC/FU shall not follow any restrictive practices or link the sale of its investment products to any other products offered by it.
    (vi)It shall be prominently stated in all publicity material, if any, distributed by the FC/FU that the purchase by a FC/FU’s customer of any investment products is purely voluntary, and is not linked to availment of any other facility from the FC/FU.
    (vii) The third party product issuer shall be a regulated financial entity.
    (viii) There shall be a Code of Conduct for the sales personnel who shall adhere to the same.
    (ix)The fact that the FC/FU is only acting as an agent shall be clearly brought to the notice of the customer.
    (x) No incentive (cash or non-cash) shall be linked directly or indirectly to the sale/income received from marketing/distribution services of such investment products. The staff of the FC/FU shall not be permitted to receive any incentive (cash or non-cash) directly from the third party issuer. FC/FU must ensure that there is no violation of the above in the incentive structure to staff.

(xi)FC/FUs shall disclose in the ‘Notes to Accounts’ to their Balance Sheet, the details of fees/remuneration received in respect of marketing and distribution function undertaken by them.
C. Guidelines on distribution of mutual funds units

  1. In addition to the general guidelines as above, an FC/FU shall also adhere to the following guidelines while undertaking distribution of mutual fund products:
    (i) The investors’ applications for purchase/sale of mutual fund units shall be forwarded to the mutual funds/registrars/transfer agents.
    (ii) The purchase of units shall be at the customers’ risk without the FC/FU guaranteeing any assured return.
    (iii) No mutual fund units shall be acquired from the secondary market or bought back from a customer for selling it to other customers.
    (iv)Extension of credit facility to individuals against the security of mutual fund units shall be in accordance with the extant instructions on advances against shares/debentures and units of mutual funds.
    (v) A FC/FU holding custody of mutual fund units on behalf of its customers shall keep the investments of the customers distinct from its own investments. FC/FUs shall put in place adequate and effective control mechanisms in this regard.
    D. Guidelines on distribution of insurance products
  2. In addition to the general guidelines as above, an FC/FU shall also adhere to the following guidelines while undertaking distribution of insurance products:
    (i) FC/FU shall necessarily undertake a customer need assessment prior to sale of insurance products.
    (ii) The FC/FU shall comply with provisions of IRDAI (International Financial Services Centre Insurance Intermediary Offices) Guidelines, 2019 No. IRDA/RI/GDL/MISC/012/01/2019, dated January 16,2019 and any other Regulation/ Circular/Guidelines issued by the Authority from time to time.
    (iii) It shall be ensured that performance assessment and incentive structure for staff is not violative of IRDAI (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations ,2016 as amended from time to time

Finance Company and Finance Unit derive their meanings from the main act i.e. The International Financial Services Centre Authority Act, 2019 which stipulates that finance company is a financial institution set up in IFSC to carry on business in financial services in IFSC in securities, mutual funds, insurance, deposits, credit arrangements etc. Finance Unit is the branch unit of the said financial institution set up in accordance with these regulations.

For more details please go to https://ifsca.gov.in/

Leave a comment

Filed under Uncategorized

fee structure for IFSC banking units

IFSCA has released a circular dated 11th May, 2021 stipulating the fee structure payable by banking units (BUs) in the International Financial Service Centre. They are as follows:

The above fee structure is applicable from 01stOctober 2020 and payable on financial year basis.

The fees payable for the period 1stOctober 2020 to 31stMarch 2021 and financial year 2021-22 shall be paid by the BUs within one month of this circular.

From next financial year onwards, the annual fee shall be payable within 30days from the beginning of financial year.

BUs will be advised separately, the fee payable by them.

BUs are directed to ensure compliance.

https://ifsca.gov.in/Viewer/Index/174

Leave a comment

Filed under banking laws

issue of CDs in IFSC

IFSCA circular dated 10/5/21 giving guidelines for issue of certificates of deposits by banking units in International Financial Services Centre, India .

Certificate of Deposit (CD) is a negotiable instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a BU for a specified time period.

  1. BUs may issue CDs denominated in any convertible foreign currency and up to the amount depending on their funding requirements.
  2. CDs shall fall under the definition of a security under section 2(za) of the Foreign Exchange Management Act,1999.
  3. Minimum amount of a CD should be USD 2500 or equivalent in any convertible foreign currency.
  4. BUs may issue CDs to persons resident in India and persons resident outside India as defined in the Foreign Exchange Management Act,1999. Qualified Individual (‘QI’) or Qualified Resident Individual (‘QRI’) shall not be applicable for investment in CDs.
  5. The maturity period of CDs issued by BUs should not be less than 7 days and not more than one year, from the date of issue. There shall be no lock-in period for the CDs other than the minimum maturity period.
  6. BUs may issue CDs at a discount on face value or on the basis of fixed or floating coupon rate. In case of CDs issued on floating rate basis the methodology of compiling the floating rate should be objective, transparent and market based. The BU is free to determine such discount / coupon rate.
  7. CDs may be issued in physical form or in demat form.
  8. CDs in physical form are freely transferable by endorsement and delivery. CDs in demat form can be transferred as per the procedure laid down by the depository.
    10.BUs shall clearly inform subscribers that the CDs issued by them are not covered by Deposit Insurance and also that the lender of Last resort (LOLR) facility is not available in IFSC.
    11.BUs shall not grant loans against CDs. Furthermore, they cannot buy-back their own CDs before maturity.
    12.Since CDs are transferable, the physical certificates may be presented for payment by the last holder. BUs shall take necessary precautions to verify the chain of transfers and make payment only by credit to the account of the presenter held with them or with another BU or with the branch of a bank outside IFSCA. In case of payment to an account held in another BU or with the branch of a bank outside IFSCA, the BU shall obtain complete details of the payee and such bank accounts and keep them on record.

Leave a comment

Filed under banking laws

fee structure for investment advisors in IFSC

IFSCA circular dated 15th April, 2021 – self explanatory

Fee structure for Investment Advisers and Portfolio Managers in IFSC

1.In exercise of the powers conferred by Section 12 of the International Financial Services Centres Authority Act, 2019, the fee structure for Investment Advisers and Portfolio Managers in IFSC is being revised as follows:

Leave a comment

Filed under banking laws

IFSCA regulations

https://pib.gov.in/PressReleasePage.aspx?PRID=1705254

The IFSCA Authority (Authority) met on March 15, 2021 and inter alia took the following decisions:

  1. IFSCA (Market Infrastructure Institutions) Regulations, 2021 (MII Regulations)

The market infrastructure institutions (MIIs) viz. stock exchanges, clearing corporations and depositories are of critical importance in the growth and stability of any financial system. The Authority at its meeting held on March 15, 2021 approved the MII Regulations.

The MII Regulations, approved by the Authority, shall inter alia provide more flexibility in terms of shareholding of MIIs in IFSC (including the option of consortium of MIIs recognised in India, IFSC or FATF compliant foreign jurisdiction holding shareholding of the MIIs in IFSC), prescribe enhanced governance norms and ensure adequate risk management by MIIs, in addition to other general obligations.

The MII Regulations are also in line with the global standards, keeping in mind the twin objectives of development of MIIs with adequate safeguards to ensure stability and continuity of the MIIs in IFSC.

  1. International Financial Services Centres Authority (Finance Company), Regulations, 2021

The Authority also approved the Draft International Financial Services Centres Authority (Finance Company), Regulations, 2021, which provide opportunities to non-bank entities, both Indian as well as foreign, to set up units in the IFSC to undertake a wide range of financial services related activities (including, among others, air craft / ship leasing). The regulations are aligned with the international standards and ensure transparency.

The salient features of these regulations are as follows:

The regulations enable a finance company (FC) / finance unit (FU)  to be set up in the form of either a branch (to be called FU) of a regulated financial service provider in the home jurisdiction or as a separate entity incorporated in IFSC – Joint Venture or a Wholly Owned Subsidiary of a parent entity or an independent entity ;

The applicant parent entity needs to be from a FATF compliant jurisdiction and shall provide the prescribed minimum capital funds for the FC / FU and satisfy the due diligence requirement as deemed fit by the Authority;

If the parent entity is engaged in the business of a regulated financial services activity then it shall obtain prior approval of the respective home regulator to set up an FC or an FU in IFSC;

The permissible activities for FC/FU are divided in three broad categories: Specialised activities, Core activities and Non-core activities;

The applicability of prudential regulatory framework and capital adequacy ratio shall be based on the nature of activities proposed to be undertaken by the FC/FU;

  1. International Financial Services Centres Authority (Banking) (Amendment), Regulations, 2021

In order to widen the scope of services and development offered by the banking units operating in IFSC, the Authority approved inclusion of portfolio management services and investment advisory services in the permitted activities for banking units.

  1. The Authority approved the fee structure for MIIs, Market Intermediaries, IBUs operating in GIFT IFSC as recommended by the  IFSCA Internal Committee.

Leave a comment

Filed under banking laws

ancillary services at IFSCA

IFSCA has vide its circular dated 10th February, 2021 provided detailed guidelines regarding providing of ancillary services at its GIFT- IFSCA. Ancillary services will mean anything from legal, compliance, secretarial, to auditing, accounting, book-keeping, taxation, professional & management consultancy services, trustee management, administration, asset management etc.

The requirements are detailed as to what the service providers can do, their duties and obligations etc. and the responsibilities of the entities in IFSCA. Gist of the regulations are given below:

  1. Considering the importance of professional and other service providers for the development of financial products, financial services and financial institutions in the International Financial Services Centres (IFSC), a framework for enabling ancillary services has been provided for as under:
    A. Applicability:
    This framework shall be applicable to all ancillary service providers (hereinafter referred to as “service provider(s)”) engaged in one or more permissible ancillary services within the IFSC.
    B. Definition:
    Ancillary services shall mean those services which directly or indirectly aid, help, assist or strengthen or are attendant upon or connected with the services, as detailed under subclauses (i) to (xi) of clause (e) of sub- section (1) of section 3 of the IFSCA Act, 2019.
    C. Permissible ancillary services:
    The service providers may engage in any one or more of the following activities:
    (i) Legal, Compliance and Secretarial;
    (ii) Auditing, Accounting, Bookkeeping and Taxation Services;
    (iii) Professional & Management Consulting Services;
    (iv) Administration, Assets Management Support Services and Trusteeship Services;
    (v) Any other services as approved by IFSCA from time to time.
    The detailed activities of such permissible ancillary services are detailed at Annexure – I.
    D. Eligibility Conditions:
    The following entities are eligible to act as a service provider so as to provide permissible ancillary services pertaining to activities in relation to financial products, financial services and financial institutions in the IFSC:
    (i) Any existing or newly incorporated entity set up in the IFSC or
    (ii) Any Indian or foreign incorporated entity by establishing a branch or a subsidiary
    E. Service Recipients:
    Service providers can provide permissible services to any one or more of the following:
    (i) Entity(ies) set up in the IFSC;
    (ii) Financial services entities from foreign jurisdictions for various activities in the IFSCs in India or other related activities overseas;
    (iii) Indian entities who propose to open, set up or carry out operations in IFSCs or foreign jurisdiction, provided consideration is received in freely convertible foreign currency.
    F. Application Process:
    An applicant desirous to act as a service provider and eligible under this framework to provide permissible ancillary services shall apply to IFSCA in the application form specified at Annexure-II.
    G. Currency for conduct of business:
    Service providers shall transact in freely convertible foreign currency only. However, the service providers may defray their administrative expenses in INR by maintaining an INR account.
    H. Maintenance of Books of Accounts, Records and Documents
    Every service provider shall maintain its books of accounts, records, and documents in such foreign currency, as may be declared at the time of making an application.
    I. Submissions of Report / Information
    (i) Every service provider shall furnish the following information to the IFSCA:
    a. Annual financial statements for the entity registered.
    b. Confirmation of compliance with the regulations, circulars, guidelines and/or directions as issued by the International Financial Services Centres Authority from time to time.
    c. Details of material regulatory action, if any
    (ii) Every service provider authorized by the IFSCA shall submit the financial information to the IFSCA in US Dollar, unless otherwise specified by the IFSCA.
    (iii) The IFSCA from time to time may call for any information, documents, or records as it may deem necessary from the service provider.
    J. Compliance with other requirements
    The service providers shall comply with all the applicable and relevant regulatory obligations, standards, policies and guidelines as issued by any other competent authority(ies).
    K. Action in case of default
    If a service provider fails to comply with any of the requirement under this framework and/or other directions and guidelines issued from time to time, the IFSCA may take appropriate action as it deems fit, after giving a reasonable opportunity to make its written submissions.
    L. Fees
    The applicant / registered entity shall pay to IFSCA such fees and charges as specified from time to time.
    M. Power to remove difficulties, specify procedures and issue clarifications
    In the event of any difficulty in giving effect to this framework or to ensure effective operation of this framework, the IFSCA may specify the necessary norms, procedures, processes, manners and may also provide relaxations, by way of guidelines or circulars.

https://ifsca.gov.in/Viewer/Index/143

Leave a comment

Filed under banking laws

investing in securities under LRS

IFSCA has vide its circular dated 19th February, 2021 clarified that for resident individuals who want to open a current account in a banking unit situated in GIFT-IFSC, the minimum net worth criteria of USD1 million is not applicable. This is because the account is going to be opened for the purpose of routing the investment in securities under the Liberalised Remittance Scheme of the RBI. Only in such cases the minimum net worth criteria has been dispensed with.

Otherwise a qualified resident individual can open a current account with a banking unit at GIFT-IFSC if he has a minimum net worth of USD1 million. This is for the purpose of undertaking transactions which are either current account or capital account or a combination of both. These accounts are held in freely convertible currency.

Copy of the circular can be found here https://ifsca.gov.in/Viewer/Index/150

Leave a comment

Filed under banking laws