IFSCA Official Had introduced a detailed framework for investment Bankers 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: Advice related to investing in, purchasing, selling, or dealing in securities or investment products. It includes financial planning but excludes advice disseminated through widely accessible media.
Investment Banker: An individual or entity involved in issue management, including arranging the sale, purchase, or subscription of securities, acting as a manager, consultant, or advisor in issue management.
Person Associated with Investment Advice: Includes any member, partner, officer, director, or employee of the investment adviser involved in providing investment advisory services, excluding those performing clerical or administrative functions without client interaction.
Permissible Clients
Investment advisers in GIFT City IFSC can cater to the following client categories:
Residents outside India.
Non-resident Indians (NRIs).
Non-individual residents in India eligible under FEMA for offshore investments.
Individual residents in India eligible for offshore investments under the Liberalized Remittance Scheme of the Reserve Bank of India.
Permissible Activities
Responsibilities of Lead Investment Banker: Clear definition and communication of responsibilities before issue subscription.
Agreement with Issuer: Specifying roles and responsibilities, ensuring no conflicts if the investment banker is associated with the issuer.
Underwriting: Investment bankers can underwrite issues, with agreements detailing obligations and commissions.
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 | Foreign Entities |
$ 0.75 million | $ 1.5 million |
Fee Structure
The fee structure for investment advisors is as follows:
Application Fee | Registration Fee | Annual Fee |
$ 1000 | $ 3500 | $ 3500 |
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:
Seek and maintain confidentiality of clients’ financial information.
Provide adequate material disclosures to clients.
Ensure that fees are fair and reasonable.
Protect investors’ interests and provide best possible advice.
Observe high standards of integrity, fairness, and professionalism.
Avoid manipulative, fraudulent, or deceptive practices.
Address investor inquiries and grievances promptly.
Maintain confidentiality and disclose conflicts of interest.
Avoid unfair competition and ensure non-discriminatory practices.
Inform the Authority of significant changes or regulatory actions.
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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