IFSCA - Regulatory actions taken

Gujarat International financial Tech city or in simple terms, GIFT city is the first operational smart city and international financial service Centre in India. It is aimed to be the global financial and IT hub, which can compete with other international financial Centres. To properly regulate and implement the objective of creating IFSC, a separate regulatory authority has been formed. It is called IFSCA.

IFSCA is the sole regulator of India's International financial service Centres. Even if we call IFSCA, as a regulator, it is not just a regulator, but also act as the developer for international financial service centres to create a dynamic Ecosystem within the IFSC by regulating financial services, products and institutions, and also by promoting ease of doing business.

One of the important area for IFSCA is to practically enforce various compliance requirements required for players at IFSC. IFSCA ensure that the entities and services at IFSC are according to international standards and comparable to global financial centres.

The above role is exercised by IFSCA by developing, regulating, supervising and governing the entire system in IFSC.

To exercise the above powers, IFSCA is empowered with powers, exercised by domestic regulators like Reserve Bank of India, Securities and exchange board of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority.

To enforce different regulations made by the IFSCA, it It can conduct inspections, investigations, etc, and also take appropriate actions, including warning, letters, advices, penalties, and also to cancel licenses issued.

When we look on to the action taken by IFSCA on various violations by the entities at IFSC, we can see that the actions are to ensure proper compliances and to create regulatory environment in the IFSC.

The IFSCA, as a unified regulator, has been actively taking regulatory actions to ensure compliance and maintain the "substance" of GIFT City. Here are some notable cases of regulatory action:

Following are some instances where the IFSCA have taken actions

Non compliances

o Darwin Platform Aircraft Leasing and Financing IFSC Limited (July 2024): 

This was a case where the above company could not bring the required minimum capital within the specified time. IFSCA has cancelled the registration of this company for the above reason. In addition to other noncompliances. This is an instance to demonstrate the strict stand taken by IFSCA on proper capitalisation or capital adequacy requirement.

o Prowess Insurance Brokers Pvt. Ltd. (PIBPL IFSC Branch) (February 2025):

In this case, the companies IRDAI approval was expired and even after IFSCA instructed them not to do fresh insurance business, they engaged in fresh insurance business. The license issued to the above company was cancelled by IFSCA, this demonstrates the strictstand taken by IFSCA on adherence to instructions and directions.

Warning Letters/Orders:

o Neo Asset Management Private Limited (IFSC Branch) (May 2025): 

In this case, the company failed to appoint key managerial persons as per the provisions of Law and directions issued by IFSCA. IFSCA have issued a warning letter to this fund managing company for the absence of key managerial persons and also, principal officer. The fun management company assured the authority that they will take necessary actions. This action narrates the situation where the authroity’s strict action for having necessary man power in place.

Advisories for Ancillary Service Providers:

o In a recent case (this case was referred from a blog ), a warning letter was issued to an ancillary service provider. This directed them:

•  Not to render services to recipients not falling under Section 1(E) of the Ancillary Services Framework.

•  Not to claim any tax/other benefits for transactions carried out with service recipients not fulfilling the specified criteria. This shows IFSCA's vigilance regarding the scope of services and proper claiming of benefits within the IFSC framework.

These actions illustrate that IFSCA employs a range of enforcement tools, from warnings and advisories to the more severe action of license cancellation. Their actions demonstrate a commitment to:

· Ensuring regulatory compliance: Holding entities accountable for adherence to IFSCA regulations.

· Maintaining "substance": Requiring genuine operations and physical presence.

· Protecting investor interests: By ensuring entities meet capital and operational standards.

· Promoting a robust and credible financial ecosystem: By deterring misconduct and upholding high standards.