𝐈𝐅𝐒𝐂𝐀 𝐂𝐥𝐚𝐫𝐢𝐟𝐢𝐞𝐬 𝐍𝐞𝐭 𝐖𝐨𝐫𝐭𝐡 𝐑𝐞𝐪𝐮𝐢𝐫𝐞𝐦𝐞𝐧𝐭𝐬 𝐟𝐨𝐫 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐌𝐚𝐫𝐤𝐞𝐭 𝐈𝐧𝐭𝐞𝐫𝐦𝐞𝐝𝐢𝐚𝐫𝐢𝐞𝐬

The International Financial Services Centres Authority (IFSCA) has recently issued a circular addressed to all Capital Market Intermediaries operating within the International Financial Services Centre (IFSC), including registered distributors. The circular directs that any Capital Market Intermediary (CMI) failing to maintain the required net worth at any point will be prohibited from conducting both ongoing and new business activities in the IFSC until the net worth is restored to compliance levels.

This directive refers to Chapter II Regulation 6 of the IFSCA (Capital Market Intermediaries) Regulation, 2021, which mandates that CMIs must maintain their net worth at all times. The IFSCA holds the authority to take necessary action for non-compliance with this regulation, as clarified in the circular, without prejudice to other actions.

Regulation 6 stipulates:
“An entity seeking registration as a capital market intermediary shall comply with the net worth requirements as specified in Schedule II of these regulations or such other amount as may be specified by the Authority, and the same shall be maintained at all times:

Provided that an entity operating as a capital market intermediary in multiple categories shall maintain the highest of the applicable minimum net worth requirements unless a higher amount is specified by the Authority.”

The intermediaries covered under Schedule II include Broker dealer, Clearing Member, Self-clearing member, Depository Participant, Investment Banker, Investment Adviser, Custodian, Credit Rating Agency, Debenture Trustee and Account aggregator. Until 2022, Portfolio Managers were included under Schedule II, but subsequent to the IFSCA (Fund Management) Regulations, 2022, this category was omitted.

IFSCA has taken this step to ensure that net worth requirements are strictly maintained at all times, reflecting its commitment to regulating the financial stability of Capital Market Intermediaries operating in the IFSC.

The IFSCA derives its power for such enforcement from Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, in conjunction with Regulation 72 of the IFSCA (Capital Market Intermediaries) Regulation, 2021. This empowers IFSCA to specify procedures, norms, and clarifications through circulars or guidelines to ensure regulatory compliance within IFSC operations.

The circular and Schedule II of the IFSCA (Capital Market Intermediaries) Regulation, 2021 are enclosed.

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