Sebi To Allow Stock Brokers To Undertake Securities Market Activities In GIFT City IFSC

In a bid to increase the ease of doing business for stock-brokers and to garner wider market participation, the Securities and Exchange Board of India (Sebi) has proposed to reduce regulatory hassle for stock brokers to operate in the International Financial Services Centre (IFSC) at GIFT City.

GIFT City is India's first operational smart city and International Financial Services Centre (IFSC) located in Gujarat, aiming to be a global financial and IT services hub. Brokers are provided several incentives to operate.

In a consultation paper released on March 21, the Sebi said that it plans to allow stock brokers to operate in the International Financial Services Centre (IFSC) at GIFT City, without needing prior approval from the market regulator. However in order to operate from IFSC, the brokers will need to comply with some guidelines issued by the Sebi.

Notably, the regulator has said that stock brokers who wish to conduct business-related securities market activities in GIFT-IFSC will have to do so by forming a Separate Business Unit (SBU) of the stock broking entity.

"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 respective regulatory authority and all activities of the SBU in GIFT-IFSC would be under the jurisdiction of that regulatory authority," Sebi said.

The market regulator has also urged stock brokers to ensure that the activities conducted in the securities market by the SBU in the GIFT-IFSC are separate from the business of the stockbroker and are at an ‘arm's-length relationship’ from the activities undertaken by the stock broking entity.

"Such SBU in GIFT-IFSC shall be exclusively engaged in providing securities market-related activities in GIFT-IFSC only," Sebi said.

Additionally, stock broking units will also need to have a separate account for the SBU and the net worth of the SBU will need to be separate from the net worth of the stock broker in the Indian securities market. The SBU’s activities will also come under the supervision of another regulatory authority.

The market regulator has also urged brokers who have already floated subsidiaries or entered into joint ventures to undertake securities market- related activities in GIFT-IFSC to stop their operations and provide their services by forming an SBU in the GIFT City and complying with Sebi’s guidelines.

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