The International Financial Services Centres Authority (IFSCA) on October 18, 2021 has issued the International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021.
The most important provisions of the regulations are as followed:
• Application for registration
(1) An entity desirous of obtaining a certificate of registration as a capital market intermediary in IFSC shall submit an application form in the format provided in Part I of Schedule I to the Authority along with the application fees as specified by the Authority:
Provided that the applicant seeking registration to act as a broker dealer or clearing member or depository participant shall make the application along with such additional information through the recognised stock exchange or recognised clearing corporation or recognised depository respectively.
Explanation: An applicant may apply for multiple registrations in the same application form.
(2) The recognised stock exchange, the recognised clearing corporation, the recognised depository, as the case may be, shall examine the eligibility of the applicant in terms of these regulations, relevant Acts, regulations and the rules, bye-laws of the concerned stock exchange, clearing corporation, depository and forward the application with the application fees to the Authority along with its recommendation as early as possible but not later than thirty days of receipt of the complete application with the specified application fees.
(3) Subject to approval by the concerned recognised stock exchange, and without any requirement of a separate certificate of registration, -
(a) a registered clearing member may be permitted to act as a broker dealer in a recognised stock exchange; and
(b) a registered broker dealer may be permitted to operate in more than one recognised stock exchange.
(4) Subject to approval by the concerned recognised clearing corporation, and without any requirement of a separate certificate of registration, -
(a) a registered broker dealer may be permitted to act as a clearing member in a recognised clearing corporation; and
(b) a registered clearing member may be permitted to operate in more than one recognised clearing corporation.
(5) Subject to approval by the concerned recognised depository, a registered depository participant may be permitted to act as a participant of another recognised depository without obtaining separate certificate of registration.
(6) The provisions of these regulations, as applicable to the grant of registration shall also apply to an application for renewal of registration of a capital market intermediary, wherever applicable.
• Net worth requirements
An entity seeking registration as a capital market intermediary shall comply with the net worth requirements as specified in Schedule II of these regulations or such other amount as may be specified by the Authority, and the same shall be maintained at all times:
Provided that an entity operating as a capital market intermediary in multiple categories shall maintain the highest of the applicable minimum net worth requirements unless a higher amount is specified by the Authority.
• Fit and proper requirements
(1) A capital market intermediary shall ensure that the entity and its principal officers, directors/ partners/ designated partners, key managerial personnel and controlling shareholders are fit and proper persons, at all times.
(2) For the purpose of sub-regulation (1), a person shall be deemed to be a fit and proper person if, -
(a) such person has a record of fairness and integrity, including but not limited to-
(i) financial integrity;
(ii) good reputation and character; and (iii) honesty.
(b) such person has not incurred any of the following disqualifications –
(i) the person has been convicted by a court for any offence involving moral turpitude or any economic offence or any offence against securities laws;
(ii) a recovery proceeding has been initiated against the person by a financial regulatory authority and is pending;
(iii) an order for winding up has been passed against the person for malfeasance;
(iv) the person has been declared insolvent and not discharged;
(v) an order, restraining, prohibiting or debarring the person from accessing or dealing in financial products or financial services, has been passed by any regulatory authority, and a period of three years from the date of the expiry of the period specified in the order has not elapsed;
(vi) any other order against the person, which has a bearing on the securities market, has been passed by the Authority or any other regulatory authority, and a period of three years from the date of the order has not elapsed;
(vii) the person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;
(viii) the person is financially not sound or has been categorized as a wilful defaulter;
(ix) the person has been declared a fugitive economic offender; or
(x) any other disqualification as may be specified by the Authority.
• Grant of registration
(1) The Authority may, after considering the application and on being satisfied that the applicant has complied with the conditions laid down in these regulations and is eligible to act as a capital market intermediary, and upon receipt of registration fees (as specified by the Authority), grant registration to the applicant subject to the conditions as the Authority may deem fit.
(2) IftheAuthorityisoftheopinionthattheregistrationcannotbegranted,itshallcommunicatethedeficiencies to the Applicant giving it thirty days’ time to rectify them.
(3) IftheApplicantfailstorectifysuchdeficienciestothesatisfactionoftheAuthoritywithinthespecifiedtime, the Authority may refuse to grant registration and shall communicate the same to the Applicant, giving reasons for such refusal:
Provided that no such refusal shall be made by the Authority without giving the Applicant an opportunity to make written submissions on the grounds on which the registration is proposed to be refused.
(4) The capital market intermediary shall comply with any other condition as may be imposed by the Authority as it deems fit in the interest of the investors or orderly development of the securities market or for regulating the working of the capital market intermediary, in an IFSC.
(5) The registration granted to a capital market intermediary may be withdrawn by the Authority only after giving a reasonable opportunity of being heard.
• Period of validity
The certificate of registration of a capital market intermediary shall be valid for such period as may be specified by the Authority, unless it is suspended or cancelled by the Authority.
• Surrender of registration
A registered capital market intermediary may file an application with the Authority for surrender of its registration:
Provided that a broker dealer or clearing member or depository participant shall make such application through the recognised stock exchange or recognised clearing corporation or recognised depository respectively.
• Suspension, cancellation of registration or any other actions
(1) The Authority may take such action as deemed fit, including suspension or cancellation of registration, against a capital market intermediary if it:
(a) fails to comply with any conditions subject to which a certificate of registration has been granted; or
(b) contravenes any of the provisions of the Act or rules or regulations or circulars or guidelines or directions or instructions issued thereunder.
(2) Without prejudice to sub-regulation (1), a recognised stock exchange may take such action as deemed fit, including suspension, against a registered broker dealer, in accordance with the applicable laws.
(3) Without prejudice to sub-regulation (1), a recognised clearing corporation may take such action as deemed fit, including suspension, against a registered clearing member, in accordance with the applicable laws.
(4) Without prejudice to sub-regulation (1), a recognised depository may take such action as deemed fit, including suspension, against a registered depository participant, in accordance with the applicable laws.
• Power to call for information
The Authority may call for any information, documents or records from a capital market intermediary.
• Power to relax strict enforcement of the regulations
(1) The Authority may, in the interest of development and regulation of financial services in IFSC, relax the strict enforcement of any requirements of these regulations.
(2) For seeking relaxation under sub-regulation (1), an application, giving details and the grounds on which such relaxation has been sought, shall be filed with the Authority along with a non-refundable fee of USD 1500.
(3) The Authority shall process such application within thirty days of the date of receipt of the application complete in all respects and shall record reasons for acceptance or refusal of the relaxations sought by the applicant.
[Notification No. IFSCA/2021-22/GN/REG018]
