IFSCA Releases Regulatory Framework For Distribution Of Capital Market Products, Services

The International Financial Services Centres Authority (IFSCA) on Wednesday came out with a framework for the distribution of financial products and services in the International Financial Services Centres (IFSC).
     
As of now, GIFT-IFSC is the maiden international financial services centre in India.
     
"In recognition of the crucial role played by distributors in the distribution of capital market products and services, a regulatory framework for distribution activities has been specified," the IFSCA said in a statement.
     
Further, it said, as the unified regulator of a global financial centre, IFSCA has enabled the registered distributors to undertake global distribution from IFSC and offer their services to clients in various jurisdictions.
     
In order to protect the interest of clients, it said, the framework provides for various eligibility requirements, a detailed code of conduct including an advertisement code, other obligations, various permissible activities, responsibilities of issuers and service providers in IFSC, etc.
     
Distributors may undertake the distribution of capital market products and services, it said.
     
While distributors may offer their services to “sophisticated investors” and distribute a wide bouquet of products and services to them, the distribution to other investors may be undertaken with a higher level of diligence and from a restricted set of products and services, it said.
     
Distributors are permitted to enter into arrangements with other distributors (called, Associated Distributors) from India, IFSC and foreign jurisdictions to widen the scope of their operations, get access to a larger pool of issuers and service providers, and cater to a broader clientele, it said.
     
For investing in such jurisdictions which permit omnibus structures, certain distributors, such as Banking Units, Finance Companies, Broker-Dealers and those with a net worth of more than USD 1,50,000, are permitted to invest through such structure, subject to adequate measures, such as prior consent of clients, maintenance of records, compliance with KYC and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) norms, etc.
     
A comprehensive code of conduct has been prescribed to ensure distributors maintain high standards of integrity, disclosure, diligence, promptitude and fairness in their dealings with clients. The code of conduct shall be complied with by all registered distributors, associated distributors and other distributors that are empanelled by IFSC-based entities for the distribution of their products/services, it said.
     
According to a separate statement, IFSCA and the Council on Energy, Environment and Water (CEEW) have signed a Memorandum of Understanding (MoU) for mutual assistance and cooperation in the area of sustainable finance.
     
India recently launched Mission LiFE (Lifestyle for the Environment) as an India-led global movement to protect and preserve the environment.
     
This was closely followed by the commencement of India’s G20 Presidency, with the theme One Earth, One Family, One Future, it said.
     
Sustainability is a common thread that runs through both these endeavours. In this context, finance is a key enabler – as highlighted by CEEW research, which estimates that India’s net zero by 2070 target would require USD 10 trillion in investments, it said.
     
GIFT-IFSC, an offshore jurisdiction within India, is emerging as a global hub for sustainable finance, it said, adding, it is against this backdrop that IFSCA and CEEW are collaborating through a wide-ranging MoU, which includes research and joint convenings.