GIFT City IFSC Update

The Securities and Exchange Board of India (SEBI) vide circulars dated July 19, 2024 has enabled ESG Rating Providers (“ERPs”) and Credit Rating Agencies (CRAs) to undertake activities under IFSCA in the International Financial Services Centre - Gujarat International Finance Tech-city (“IFSC, GIFT City”).

Key Highlights for ERPs:

1. Regulation Update: Per Regulation 28E(d) of CRA Regulations and Para 7.1 of the Master Circular for ERPs (dated May 16, 2024), ERPs can now undertake ESG rating activities under the guidelines of IFSCA.

2. Scope: ERPs can undertake or offer ESG rating of any product or issuer, as may be required by another financial sector regulator or authority, under the guidelines of such authority/ regulator. To enable ERPs to undertake ESG rating activities in the IFSC, GIFT City, IFSCA is added to the list of financial sector regulators in Annexure 4 of the Master Circular for ERPs.

Key Highlights for CRAs:

1. Regulation Update: As per Regulation 9(f) of CRA Regulations and Para 25 of the Master Circular for CRAs (dated May 16, 2024), CRAs can now undertake rating activities under the guidelines of IFSCA.
2. Scope: CRAs can undertake the rating of financial instruments under the respective guidelines of the financial sector regulators/ authorities. To enable CRAs to undertake rating activities in IFSC, GIFT City, IFSCA is added to the list of financial sector regulators in Annexure 19 of the Master Circular for CRAs.

For activities carried by ERPs/ CRAs in IFSC, GIFT City the following will be the regulatory oversight:

• Issues from ERP/CRA activities in IFSC will be managed by IFSCA under Sections 12 and 13 of the IFSCA Act, 2019.
• IFSCA will handle complaints, enforcement actions, and provide information to third parties in respect of services provided by ERPs/ CRAs in the IFSC.

Both circulars are effective immediately. Both the SEBI circulars can be found here and here.

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