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Gift City regulator International Financial Services Centres Authority (IFSCA) has come up with a regulatory framework for distribution of capital market products and services from international financial services centres (IFSCs).
With this move, distributors of capital market products can register with the IFSCA, and undertake global distribution from these IFSCs and offer their services to clients in various jurisdictions. Currently, there is only one IFSC in India — GIFT City in Gujarat.
In Gift City, distributors are permitted to enter into arrangements with other distributors (called associated distributors) from India, IFSC and foreign jurisdictions to widen the scope of their operations, get access to a larger pool of issuers and service providers, and cater to a broader clientele.
In order to protect the interest of clients, the framework provides for various eligibility requirements, a detailed code of conduct including an advertisement code, other obligations, various permissible activities, responsibilities of issuers and service providers in IFSC, etc.
The capital market services that can be provided out of the IFSCs include portfolio management services and investment advisory services.
While distributors may offer their services to “sophisticated investors” and distribute a wide bouquet of products and services, the distribution to other investors may be undertaken with higher level of diligence and from a restricted set of products and services, IFSCA has said.
Simplified registration
Distributors such as banking units, finance companies, broker-dealers and those with a net worth more than $1,50,000 are permitted to invest in select countries where omnibus structure is allowed, subject to adequate measures such as prior consent of clients, maintenance of records, compliance with KYC and AML/CFT norms, etc.
A comprehensive code of conduct has also been prescribed to ensure distributors maintain high standards of integrity, disclosure, diligence, promptitude and fairness in their dealings with clients.
The code of conduct would have to be complied by all registered distributors, associated distributors and other distributors that are empanelled by IFSC-based entities for distribution of their products/services.
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