Month: January 2020

Operating Guidelines For IA in IFSC

ZAPPY TURNED 5 THIS JAN 5

Zappy celebrated it’s 5th year of incorporation on January 5, 2020. 5 successful years with various victory is not possible without the support of all the stakeholders.

In this edition, we will be seeing about Operating Guidelines for Investment Advisers (IA) in International Finance Service Centres (IFSC). We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST from this month whenever possible.

CEO CS Saranya Deivasigamani,
CEO

OPERATING GUIDELINES FOR IA in IFSC

International Finance Service Centres (IFSC) caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders.

To facilitate and regulate financial services relating to IFSC set up under section 18(1) of Special Economic Zones Act, 2005, SEBI has issued SEBI (International Financial Services Centres) Guidelines, 2015 on March 27, 2015. The IFSC Guidelines provide for a broad framework for operating of various intermediaries (including Investment Advisers (IA)) therein, as defined in Clause 2 (1) (g) of the IFSC Guidelines.

As per the IFSC Guidelines, SEBI can issue guidelines for any entity desirous of undertaking any other financial services relating to securities market. In this view, SEBI has recently issued Operating Guidelines for Investment Advisers defined in International Finance Service Centre Authority Bill, 2019.

Applicability

The applicability of these operating guidelines is subject to such conditions that may be prescribed by the Board, Reserve Bank of India and other appropriate authority from time to time.

All provisions of the IA Regulations, the guidelines and circulars issued thereunder, shall apply to IA setting up/ operating in IFSC subject to the following paragraphs. Any Subsequent amendments in IA Regulations,  guidelines and circulars issued by SEBI for investment advisers shall be applicable to IA in IFSC.

Registration

An application for grant of certificate of registration shall be made in accordance with the provisions of Chapter II of the Investment Adviser Regulations, accompanied by a non-refundable application fee as:

The following persons shall be eligible to apply for an IA Registration in IFSC to the Board:

Any entity, being a company or LLP, which has the minimum prescribed net worth as specified below at the time of application can act as an IA in the IFSC, in the following forms-

  1. Any recognised entity or entities desirous of operating in IFSC as an IA, may form a company or LLP to provide investment advisory services.

Persons seeking registration under the Investment Adviser Regulations read with these Guidelines shall provide investment advisory services only to those persons referred in Clause 9 (3) of the IFSC Guidelines. Further, persons resident outside India and non-resident Indians seeking advice from IA in IFSC shall comply with the applicable guidelines issued by the relevant  overseas regulator/ authority.

The Board may grant certificate if it is satisfied that the applicant fulfils the requirements as specified in the IA Regulations read with SEBI guidelines.

Compliance Requirements, Conditions and Restrictions

Qualification and Experience Requirement [Corresponding Regulation in IA Regulations-7(1)] Partners and representatives of applicants offering investment advice shall have:

  1. at all times, a professional qualification or post-graduate degree or post graduate diploma (minimum 2 years tenure) in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university or an institution recognized by the central government or any state government or a recognized foreign university or institution or association; and
  2. an experience of at least five years in activities relating to advice in financial products or securities, or fund/ asset/portfolio management, or investment advisory services.

Certification Requirements

Certification Requirement [Corresponding  Regulation in IA Regulations-7(2)] Partners and representatives of the applicants offering investment advice shall have, at all times, a certification on investment advisory services:

  1. in respect of partners and representatives resident in India
  2. from National Institute of Securities Markets (NISM); or
  3. from any other organization or institution including Financial Planning Standards Board India or any recognized stock exchange in India provided that such certification is accredited by NISM.
  4. in respect of partners and representatives resident outside India, from any other organization or institution or association or stock exchange which is recognized/ accredited by a Financial Market regulator in that foreign jurisdiction.

However, certification from NISM shall be mandatory for partners and representatives of applicants who offer investment advice in relation to Indian securities markets.

Net Worth Requirement

In case of applicants referred to in para 3, the net worth requirement shall be as under:

  1. An applicant shall have a net worth of not less than USD 1.5 million.
  2. In case the IA is set up as a subsidiary, the net worth requirement is to be met by the subsidiary itself. However, if the subsidiary does not meet the criteria, the net worth of the parent can be considered.
  3. The IAs shall fulfil the aforesaid net worth requirement, separately and independently for each activity undertaken by it under the relevant regulations.

Annual Audit

An IA shall ensure to conduct annual audit in respect of compliance with IA Regulations and SEBI guidelines from a chartered accountant or a company secretary or its equivalent under the laws in force of the country in which the applicant is registered or incorporated.

The conditions prescribed in Para 2 of Form A of First Schedule of IA Regulations shall continue to apply, except for the following:

  1. In case of overseas applicants, a net worth certificate (not more than 6 months old at the time of filing of application) by a chartered accountant or its equivalent under the laws in force of the country in which the applicant is registered or incorporated, shall be provided. The membership number or any other identification number of the chartered accountant or its equivalent shall be included in the certificate.
  2. In case of overseas applicants, a credit score from a body similar to CIBIL, if existing in the applicant’s jurisdiction, shall be provided.

Legal Term

Quid Pro Quo

n. a favour or advantage granted in return for something.

NewsBites

MCA Updates

SEBI Updates

RBI Updates

IT Updates

GST Updates