In a major step toward enhancing the ease of doing business and strengthening India’s position in the global financial ecosystem, the Securities and Exchange Board of India (SEBI) issued a new circular on May 2, 2025. This circular introduces a significant relaxation for SEBI-registered stock brokers aiming to expand their operations to the Gujarat International Finance Tec-City – International Financial Services Centre (GIFT-IFSC).
Key Highlights of the Circular
Traditionally, stock brokers seeking to operate in GIFT-IFSC needed prior approval from SEBI. However, the new directive eliminates this requirement, simplifying the process and encouraging more brokers to explore international financial services from India’s premier IFSC.
Now, stock brokers can undertake securities market-related activities in GIFT-IFSC through a Separate Business Unit (SBU) within their existing structure, without needing to create a new subsidiary or obtain additional regulatory approval from SEBI. This move reduces operational barriers and streamlines cross-border financial activity.
Importantly, the option to continue operating through a subsidiary or a joint venture remains available. SEBI has left the choice of business structure—subsidiary, joint venture, or SBU—entirely up to the discretion of the stock broker. This added flexibility allows brokers to tailor their international strategies according to their specific business needs.
Ring-Fencing and Regulatory Clarity
To ensure proper governance and safeguard investor interests, SEBI has mandated clear ring-fencing between domestic and GIFT-IFSC operations. Stock brokers must maintain:
- An arms-length relationship between Indian and IFSC businesses.
- Separate accounting systems for SBUs.
- Distinct net worth requirements, with SBU net worth being exclusive of the Indian entity’s.
Moreover, the activities of SBUs will fall under the jurisdiction of the International Financial Services Centres Authority (IFSCA), which means SEBI’s investor grievance redressal platforms such as SCORES, or protection mechanisms like the Investor Protection Fund (IPF), will not apply to investors availing services from SBUs in GIFT-IFSC. This regulatory demarcation clarifies responsibilities and avoids overlap.
Transition Support for Existing Entities
For brokers that have already established subsidiaries or joint ventures in GIFT-IFSC with SEBI’s approval, there is now the option to transition to an SBU model. This change can be made at the broker’s discretion, offering an opportunity to consolidate and simplify operations if deemed beneficial.
Further IFSCA and NISM has signed MoU to strengthen capacity building in GIFT IFSC. The International Financial Services Centres Authority and the National Institute of Securities Markets signed a Memorandum of Understanding on May 2, 2025, to advance capacity building and training initiatives in the securities markets in the IFSC. As part of this collaboration, NISM will partner with IFSCA to support a range of capacity-building initiatives within the IFSC. This includes conducting certification examinations for entities operating in GIFT IFSC. The MoU also covers the development of customized content, question banks, and e-learning modules aligned with IFSCA’s requirements, aimed at enhancing the professional expertise of financial institutions within the IFSC
ecosystem.
