TaxTMI 
TaxTMI 
REGISTRATION OF CAPITAL MARKET INTERMEDIARIES IN INTERNATIONAL FINANCIAL SERVICES IN INDIA
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....EGISTRATION OF CAPITAL MARKET INTERMEDIARIES IN INTERNATIONAL FINANCIAL SERVICES IN INDIA<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Other Topics<br>Dated:- 9-6-2025<br>Capital market intermediary Capital market intermediaries ('CMI' for short) are entities that facilitate financial transactions in the capital market by connecting investors with capital-seeking entities. They act as a bridge, enabling the flow of funds between those who have capital to invest and those who need capital for various purposes like financing projects or businesses. An example of a market intermediary is a stock exchange. The exchange provides a platform for buyers and sellers to trade securities, and it facilitates the transaction by matching buyers with sell....
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....ers and ensuring that the trade is executed properly. International Financial Services Authority As the dynamic nature of business in the International Financial Services Centres ('IFSC' for short) requires a high degree of inter-regulatory coordination within the financial sector, the IFSC Authority ('IFSCA' for short) has been established as a unified regulator with a holistic vision in order to promote ease of doing business in IFSC and provide world class regulatory environment. The main objective of the IFSCA is to develop a strong global connect and focus on the needs of the Indian economy as well as to serve as an international financial platform for the entire region and the global economy as a whole. Regulation for capital marke....
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....t intermediary The IFSCA framed one regulation called as 'The International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2025 ('Regulations' for reference) and published the same vide Notification No. IFSCA/GN/2025/003, dated 11.04.2025. These regulations provide the regulatory framework for registration, regulation and supervision of capital market intermediaries operating in international financial services centres in India with the objectives of protecting the interests of investors and maintaining the integrity of the securities market. These regulations came into effect from 11.04.2025. Intermediary activities The following intermediary activities that are to be taken in an IFSC are to be ....
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....taken certificate of registration from the IFSCA- * Broker dealer; * Clearing member; * Credit rating agency; * Custodian; * Debenture Trustee; * Depository participant; * Distributor; * ESG ratings and Data Products Provider; * Investment adviser; * Investment banker; and * Research entity. A banker unit may act as a banker to an issue in an IFSC, as investment banker. Exemption from registration The following categories are exempted from registration under these regulations- * Investment adviser- * An insurance agent; * A distributor of funds; * Member of ICAI, ICSI, ICMAI or other institutions authorised in this behalf; * A broker dealer of an investment banker; * A fund manager; * Any person render....
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....ing investment advice to- * Central and State Governments; * Development agencies set up under the aegis of Government; * Multilateral agencies; * Sovereign wealth funds; * Intermediaries registered with the IFSCA; * Banking companies; * Insurance companies; * Pension funds; * Provident funds; * Public financial institutions; * Any other category of investors, as may be specified by the IFSCA from time to time. * any person who provides investment advice exclusively to its associates or group entities; and any other person as may be specified by the IFSCA; * a credit rating agency, arranger, distributor, debenture trustee, ESG rating agency, ESG data products providers or registrars to an issue or share transf....
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....er agents or such other intermediaries as may be specified by the Authority located outside IFSC and providing services to an entity in an IFSC or an issuer whose securities are listed or proposed to be listed on a recognised stock exchange. Application for registration To get registration an entity shall apply through 'Single Window IT system' with the required documents by paying required fees. The applicant seeking registration to act as a broker dealer, clearing member, depository participant shall make the application along with such additional information through the recognised stock exchange, recognised clearing corporation, recognised depository. The recognised stock exchange, the recognised clearing corporation or the recognised....
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.... depository shall examine the eligibility of the applicant in terms of these regulations, applicable Acts, rules, regulations and bye-laws, and forward the application to the Authority along with its recommendation not later than 30 days of receipt of the complete application. A clearing member may be permitted to act as a broker dealer in a recognised stock exchange and a broker dealer may be permitted to operate in more than one recognised stock exchange, subject to approval by the concerned recognised clearing corporation, and without any requirement of a separate certificate of registration. Likewise, a broker dealer may be permitted to act as a clearing member in a recognised clearing corporation and a clearing member may be permitte....
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....d to operate in more than one recognised clearing corporation, subject to approval by the concerned recognised clearing corporation, and without any requirement of a separate certificate of registration. An entity filing an application for seeking registration as a capital market intermediary shall comply with additional norms and requirements as may be specified by the Authority. An application which is not complete in all respects shall be liable to be rejected. A capital market intermediary seeking registration with the Authority shall be required to be present in an IFSC in the form of a company or an LLP or a body corporate, or branch thereof. Net worth requirements The following are the net worth requirements for getting registrat....
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....ion as an capital market intermediary- * Broker Dealer (Trading Member) - As specified by recognised stock exchange; * Clearing member - As specified by the recognised stock exchange; * Credit Rating Agency - $ 200,000; * Custodian - As specified by the recognised Authority from time to time; * Debenture trustee - $ 1.5 million; * Depository Participant - A specified by depository; * Distributor - $ 50,000; * ESG Ratings and Data Products Provider - $ 25000; * Investment Adviser - $ 25000; * Investment Banker - $ 100000; * Research Entity - $ 25000. Where a capital market intermediary is set up in the form of branch, the minimum net worth requirements specified in these regulations may be maintained at the parent leve....
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....l in the home jurisdiction where the parent entity is incorporated. The minimum net worth requirements under these regulations shall be separate and in addition to the minimum net worth requirements applicable for other activities outside IFSC or within IFSC under any other regulations or framework. Where an entity intends to operate as a capital market intermediary in multiple categories covered under these regulations, it shall maintain the highest of the applicable minimum net worth requirements, unless otherwise specified by the Authority. Disqualifications The following are the disqualifications prescribed for getting registration under these regulations- * the person has been convicted by a court of law for any offence invol....
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....ving moral turpitude or any economic offence or any offence against securities laws; * charge sheet has been filed against such person by any Indian enforcement agency in matters concerning economic offences and is pending; * charges have been framed by a court of law or an equivalent institution in matters concerning economic offences; * a recovery proceeding has been initiated against the person by a financial regulatory authority and is pending; * an order has been passed against the person for malfeasance; * the person has been declared insolvent and not discharged; * an order restraining, prohibiting or debarring the person from accessing or dealing in financial product(s) or financial service(s), has been passed by any reg....
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....ulatory authority, in any matter concerning securities laws or financial services market and such order is in force; * any other order against the person, which has a material bearing on the securities market, has been passed by the IFSCA or any other regulatory authority, and a period of 3 years from the date of the order has not elapsed. * the person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force; * the person is financially not sound or has been categorized as a wilful defaulter; * the person has been declared a fugitive economic offender; or * any other disqualification as may be specified by the Authority. Where any person has been declared as not 'fit and proper person'....
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.... by an order of a regulatory authority, such a person shall not be eligible to apply for any registration, until she satisfies the fit and proper criteria. Fit and proper requirement A capital market intermediary shall ensure that the entity and its principal officer, directors/ designated partners, key managerial personnel and controlling shareholders are fit and proper persons, at all times. A person shall be deemed to be a fit and proper person if such person has a record of fairness and integrity, including but not limited to financial integrity, good reputation and character and honesty. Such person has not incurred any of the above disqualifications. Appointment of Principal Officer and other human resources A capital market inter....
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....mediary shall designate a principal officer and a separate compliance officer based out of IFSC. A capital market intermediary shall ensure that the principal officer and the compliance officer meet the required educational qualification requirements and experience requirements. It shall be ensured that its employees shall undergo such certification courses from such institutions, as may be specified by the Authority. Furnishing of information The IFSCA shall take into account all matters which it deems relevant for grant of registration to a CMI including the following: * the applicant or its principal officer and compliance officer have the specified qualification and adequate work experience; * the applicant has the necessary....
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.... infrastructure like adequate office space, equipment, communication facilities and manpower to effectively discharge its activities; * If required, the IFSCA may undertake an inspection of the office of the applicant before the grant of a certificate of registration. Grant of registration The IFSCA may, after considering the application and on being satisfied that the applicant has complied with the conditions laid down in these regulations and is eligible to act as a CMI, and upon receipt of registration fees, grant registration to the applicant subject to the conditions as deemed fit. If the IFSCA is of the opinion that the registration cannot be granted, it shall communicate the deficiencies to the Applicant giving it thirty d....
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....ays' time to rectify them. If the Applicant fails to rectify such deficiencies to the satisfaction of the IFSCA within the specified time, the IFSCA may refuse to grant registration and shall communicate the same to the Applicant, giving reasons for such refusal after giving a reasonable opportunity to the applicant. The CMI shall comply with any other conditions as may be imposed by the Authority as it deems fit in the interest of the investors or orderly development of the securities market, in an IFSC. Validity of registration The certificate of registration granted to a CMI shall be perpetual unless it is suspended or cancelled by the IFSCA Withdrawal of registration The registration granted to a CMI may be withdrawn by the IFSCA on....
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....ly after giving a reasonable opportunity of being heard. Surrender of registration A CMI may file an application with the IFSCA for surrender of its registration. a trading member or clearing member or depository participant shall make such application through the recognised stock exchange or recognised clearing corporation or recognised depository. The voluntary surrender of certificate of registration shall be effective only after its acceptance by the IFSCA.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....