Investment Advisors at IFSC GIFT City

IFSCA Official Had introduced a detailed framework for investment advisors operating within the GIFT City  IFSC. This framework is designed to streamline operations, ensure regulatory compliance, and bolster investor protection. Here, we outline the key aspects of the new regulations.

Key Definitions

Investment Advice: This encompasses any guidance on investing in, purchasing, selling, or dealing in securities or investment products, as well as advice on investment portfolios. It includes financial planning, regardless of the medium of communication, but excludes general investment advice disseminated widely through media such as newspapers, magazines, or electronic broadcasts.

Investment Adviser: Defined as any individual or entity engaged in providing investment advice for a fee. This includes any person presenting themselves as an investment adviser, regardless of the title they use.

Permissible Clients

Investment advisers in GIFT City IFSC can cater to the following client categories:

1. Residents outside India.

2. Non-resident Indians (NRIs).

3. Non-individual residents in India eligible under FEMA for offshore investments.

4. Individual residents in India eligible for offshore investments under the Liberalized Remittance Scheme of the Reserve Bank of India.

Structure of Eligible Entities

Eligible entities for registration include:

• Companies

• Limited Liability Partnerships (LLPs)

• Body corporates

• Partnership firms

• Proprietorship firms

Net Worth Requirement

The minimum net worth requirements for entities are:

• Indian entities: USD 0.5 million

• Foreign entities: USD 1 million

Fee Structure

The fee structure for investment advisors is as follows:

• Application Fee: USD 750

• Registration Fee: USD 1500

• Annual Fee: USD 1500 (from the next financial year post-approval)

Disclosure Requirements

Investment advisers must provide prospective clients with comprehensive information about:

• Their business and disciplinary history.

• Terms and conditions of advisory services.

• Affiliations with other intermediaries.

Additionally, advisors must disclose to clients:

• Their holdings or positions in advised financial products or securities.

• Potential or actual conflicts of interest.

• Key features and performance records of the products or securities.

• Relevant warnings and disclaimers.

Fiduciary Duties and Conduct

Advisors must:

• Act in a fiduciary capacity, disclosing conflicts of interest.

• Maintain an arm’s-length relationship between advisory and other activities.

• Refrain from personal transactions contrary to client advice for 15 days unless notified to clients 24 hours in advance.

• Ensure suitability of investments to client risk profiles and financial positions.

Staff Requirements

Entities must appoint at least one Principal Officer with:

• A professional or postgraduate degree in finance, law, accountancy, or economics.

• A minimum of five years of experience in securities or related financial services.

All staff involved in distribution activities must hold at least a graduation degree.

Code of Conduct

Investment advisers are required to:

1. Seek and maintain confidentiality of clients’ financial information.

2. Provide adequate material disclosures to clients.

3. Ensure that fees are fair and reasonable.

4. Protect investors’ interests and provide best possible advice.

5. Observe high standards of integrity, fairness, and professionalism.

6. Avoid manipulative, fraudulent, or deceptive practices.

7. Address investor inquiries and grievances promptly.

8. Maintain confidentiality and disclose conflicts of interest.

9. Avoid unfair competition and ensure non-discriminatory practices.

10. Inform the Authority of significant changes or regulatory actions.

11. Avoid insider trading and have robust internal controls and resources.

Exemptions from Registration

Certain individuals and entities, such as insurance brokers, pension advisers, mutual fund distributors, legal professionals, and registered intermediaries, are exempt from registering as investment advisers if their advisory activities are incidental to their primary business.

Tax Benefits

Investment advisors operating in GIFT City IFSC can avail themselves of substantial tax benefits, including:

• 100% tax exemption on business profits for 10 out of the first 15 years.

• Reduced Minimum Alternate Tax (MAT) rate of 9% for IFSC units.

For more detailed information on tax benefits, please visit GIFT City IFSC Tax Benefits.

This framework by IFSCA sets a robust regulatory environment, aiming to enhance the integrity, transparency, and efficiency of investment advisory services in GIFT City Gujarat & India.

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Disclaimer: his post is for informational purposes only and does not constitute professional advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information provided. We are not responsible for any loss or damage arising from its use. Consult professionals for specific advice.