SEBI moves to ease entry for stock brokers in GIFT-IFSC with new proposal

Market regulator SEBI has proposed simplifying regulations for stock brokers looking to undertake securities market-related activities in Gujarat International Finance Tech-city – International Financial Services Centre (GIFT-IFSC).

In a consultation paper released on Friday, the regulator suggested doing away with the requirement of obtaining a No Objection Certificate (NOC) from SEBI to float subsidiaries or enter joint ventures for operations in GIFT City.

Under the current framework, SEBI-registered stock brokers must secure prior approval from the regulator and maintain an arms-length relationship between their domestic operations and activities in GIFT-IFSC, including separate key personnel, infrastructure, and regulatory oversight.

The new proposal allows brokers to conduct these activities through a Separate Business Unit (SBU) within the same entity, eliminating the need for a distinct subsidiary or joint venture.

"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," SEBI said in the consultation paper.

“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.”

The regulator has invited public comments on the draft circular until April 11, 2025.

According to the draft circular, the SBU in GIFT-IFSC will operate under the jurisdiction of the respective regulatory authority in the 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 respective regulatory authority and all activities of the SBU in GIFT-IFSC would be under the jurisdiction of that regulatory authority,” the draft circular read.

It has also prescribed key safeguards to ring-fence the activities of the stock brokers in the Indian securities market and that of SBU in GIFT-IFSC, which include maintaining segregated accounts and net worth for the SBU, ensuring it exclusively serves GIFT-IFSC clients, and upholding an arms-length relationship with domestic operations.

SEBI clarified that investors availing services from the SBU will not have access to the grievance redressal mechanisms or Investor Protection Fund (IPF) of Indian stock exchanges, as these fall under a separate regulatory framework.

Stock brokers who have already set up subsidiaries or joint ventures in GIFT-IFSC with SEBI’s approval can transition to the SBU model by dismantling existing structures.