The International Financial Services Centres Authority (“IFSCA” or “Authority”) vide the 23rd (twenty third) meeting of the IFSCA Authority, dated March 26, 2025,[1] approved several regulatory developments. The key highlights of the meeting are as follows:
I. IFSCA (Capital Market Intermediaries) Regulations, 2025
The Authority approved the IFSCA (Capital Market Intermediaries) Regulations, 2025 (“New CMI Regulations”), which replace the previously issued IFSCA (Capital Market Intermediaries) Regulations, 2021. The New CMI regulations provide a comprehensive framework for the registration, regulation, and supervision of capital market intermediaries operating in the International Financial Services Centre (“IFSC”). The key amendments introduced in the New CMI Regulations include:
- The New CMI Regulations introduce ‘Research Entity’ as a newly recognized category of intermediary, while the category of ‘Account Aggregator’ has been removed. Additionally, the regulatory framework for ‘Distributors’ and ‘ESG Ratings and Data Products Providers’ (“ERDPP”), which was previously outlined through circulars, has now been incorporated into the New CMI Regulations. Furthermore, any Credit Rating Agency (“CRA”) intending to engage in ERDPP-related activities shall obtain a separate registration as an ERDPP entity under these New CMI Regulations.
- The New CMI Regulations also introduced specific qualification and experience requirements for the appointment of a Principal Officer and a Compliance Officer for all categories of intermediaries. Entities with multiple registrations under the New CMI Regulations are required to appoint a Principal Officer for each activity separately. However, at this stage, an entity may designate a common Principal Officer for multiple activities, specifically for broker-dealers, clearing members, and depository participants, as well as for CRAs and ERDPPs. Similarly, entities with multiple registrations may appoint a single Compliance Officer, subject to future review based on the entity’s size, scale, and complexity of operations.
- In terms of global access, the Authority has decided to maintain the current regulatory framework while further policy deliberations take place. Until such deliberations are concluded, the status quo shall be maintained with respect to global access for entities in the IFSC.
- A key change introduced in the New CMI Regulations pertains to the net worth requirements for various intermediaries. For entities operating through a branch structure, the minimum net worth maintained at the parent level in the home jurisdiction must be earmarked for the branch operating in the IFSC. Additionally, for broker-dealers, clearing members, and investment bankers, only “liquid assets” shall be considered for net worth computation. The minimum net worth requirements have been rationalized for specific intermediary categories, as follows:
- Credit Rating Agencies: USD 200,000/- (Two Hundred Thousand United States Dollars Only)
- Investment Advisers: USD 25,000/- (Twenty-Five Thousand United States Dollars Only)
- Investment Bankers: USD 100,000/- (One Hundred Thousand United States Dollars Only)
These net worth requirements shall be independent of and in addition to any other net worth obligations applicable within or outside the IFSC under different regulatory frameworks.
- Another significant regulatory change introduced is the requirement for all capital market intermediaries to submit an annual compliance audit report to the IFSCA by September 30 of each year. This measure is aimed at enhancing regulatory oversight and ensuring adherence to compliance standards.
II. IFSCA (KYC Registration Agency) Regulations, 2025
In a move to streamline customer onboarding processes, the Authority approved the IFSCA (KYC Registration Agency) Regulations, 2025 (“New KRA Regulations”). These regulations aim to regulate KYC Registration Agencies (“KRAs”) operating in the IFSC and establish a standardized framework for KYC compliance.
Under these New KRA Regulations, KRAs must meet specific eligibility and net worth requirements to be registered with IFSCA. The New KRA Regulations also set forth qualification and experience criteria for key personnel, as well as define the functions and obligations of KRAs and other regulated entities operating in the IFSC. A mandatory code of conduct has been prescribed for KRAs to ensure compliance with ethical and regulatory standards.
As per the new framework, all IFSCA-regulated entities must upload their clients’ KYC records to a registered KRA. However, the Authority has retained discretion to exempt certain categories of regulated entities from these requirements. The introduction of KRAs in IFSC is expected to enhance efficiency in customer due diligence processes and ensure smoother onboarding of clients by regulated entities.
III. Transition to IFSCA (Fund Management) Regulations, 2025
The Authority has also approved a transition framework for compliance with the IFSCA (Fund Management) Regulations, 2025. As part of this framework, entities have been granted a one-time opportunity to extend the validity of private placement memoranda (“PPMs”) that have expired, subject to specific conditions. Furthermore, the Authority has provided clarifications regarding the mandatory filing of updated PPMs in light of the changes introduced in the regulatory framework.
[1]https://ifsca.gov.in/Viewer?Path=Document%2FLegal%2Fpress-relase-of-ifsca-authority-meeting26032025084811.pdf&Title=IFSCA%20Authority%20Meeting&Date=26%2F03%2F2025