Sebi proposes relaxing rules for stock brokers to operate from GIFT city, may end NOC requirement

Securities and Exchange Board of India (Sebi) is considering doing away with the requirement of obtaining specific no objection certificate (NOC) by registered stock brokers from the market regulator to undertake securities market related activities in Gujarat International Finance Tech-city – International Financial Services Centre (GIFT-IFSC) under a separate business unit or SBUs.

In a consultation paper released on Friday, Sebi has proposed to allow the stock brokers to conduct securities market related activities in GIFT-IFSC under a Separate Business Unit (SBU) of the stock broking entity itself.

“In order to facilitate SEBI registered stock brokers to undertake securities market related activities in Gujarat International Finance Tech-city – International Financial Services Centre (GIFT-IFSC), it has been decided to do away with the requirement of obtaining specific approval from Sebi,” the consultation paper read.

The matters related to policy, eligibility criteria, risk management, investor grievances, inspection, enforcement, claims etc. for the SBU in GIFT-IFSC would be specified under the regulatory framework issued by the respective regulatory authority and all activities of the SBU in GIFT-IFSC would be under the jurisdiction of that regulatory authority.

Under the existing policy, Sebi registered stock brokers are required to obtain approval from the market watchdog in the form of NOC to float subsidiaries or to enter into joint ventures to undertake securities market related activities in Gujarat International Finance Tech-city – International Financial Services Centre (GIFT-IFSC).

Moreover, the stock brokers are required to maintain an arms-length relationship between its activities and that of its affiliate in GIFT-IFSC.The activities of the subsidiary or JV in GIFT-IFSC fall under the jurisdiction of the respective regulatory authority and it is required to obtain necessary permission from the regulatory authority.Under the proposed scheme, the stock brokers will have to ensure that securities market related activities of the SBU in GIFT-IFSC are segregated and ring-fenced from the Indian securities market related activities of the stock broker and arms-length relationship between these activities are maintained.

The SBU in GIFT-IFSC will have to be “exclusively engaged” in providing securities market related activities in GIFT-IFSC only.

The comments and suggestions should be submitted latest by April 11, 2025.

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