Key Aspects of the IFSCA Framework for GIFT City Broker Dealer / Clearing member

The IFSCA Official had issued a comprehensive framework for broker dealers operating within the GIFT City IFSC. This framework aims to streamline processes, ensure compliance, and enhance investor protection. Here, we outline the key aspects of the framework.

Key Definitions

Broker Dealer: A person with trading rights on any recognized stock exchange, including trading members. Broker dealers can be registered as segregated nominee account providers with recognized stock exchanges, adhering to specified requirements.

Clearing Member: A person with clearing and settlement rights in any recognized clearing corporation. Self-clearing members clear and settle trades on their own account or on behalf of their clients only.

Segregated Nominee Account Provider: An entity registered to offer segregated nominee account structures, ensuring regulatory compliance related to client identification, unique client code, order placement, client-level margining, and position limits.

Permissible Clients

Broker dealers and clearing members can have the following clients:

• Persons resident outside India
• Non-resident Indians
• Non-individual residents in India eligible to invest offshore under FEMA regulations
• Individual residents in India eligible to invest offshore under the Liberalized Remittance Scheme of the Reserve Bank of India

Permissible Activities

Broker dealers and clearing members must comply with applicable laws, including bye-laws, rules, and regulations specified by recognized stock exchanges and clearing corporations.

Structure of Eligible Entities

Entities eligible for registration include companies, LLPs, body corporates, partnership firms, and proprietorship firms. Both domestic and foreign entities must meet specified net worth requirements.

Net Worth Requirement

For Broker DealerI

Indian Entities: As specified by recognized stock exchange <br> Foreign Entities: Minimum of 135,000

For Clearing Member

Indian Entities: As specified by recognized clearing corporation <br> Foreign Entities: Minimum of $1,350,000

Self-clearing Member

Indian Entities: As specified by recognized clearing corporation <br> Foreign Entities: Minimum of $675,000

Fee Structure

• Application Fee: USD 500
• Registration Fee: USD 1000
• Annual Fee: USD 1000 (starting from the next financial year after approval)
• Turnover Fees Monthly: 0.00010%

Staff Requirements

Registered broker dealers must designate at least one Principal Officer with a professional or post-graduate degree in relevant fields (finance, law, accountancy, or economics) and at least five years of experience in the securities market or related financial services. All employees involved in distribution activities must hold at least a graduation degree.

Code of Conduct

Broker dealers and clearing members must abide by all provisions of the Act, and regulations issued by the Government of India, the Authority, and recognized stock exchanges/clearing corporations. They must ensure fair practices, protect investor interests, maintain confidentiality, avoid conflicts of interest, and refrain from manipulative, fraudulent, or deceptive transactions.

Tax Benefits

• 100% Tax Exemption: Business profits are fully exempt for 10 years out of the first 15 years of operation.
• Minimum Alternate Tax (MAT): Reduced MAT rate of 9% for IFSC units.

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