Regulatory & Compliance Framework for Setting Up a Broker-Dealer in GIFT IFSC

Establishing a Broker-Dealer entity in GIFT City (GIFT IFSC) requires navigating a multi-layer compliance structure involving IFSCA, India INX, NSE IFSC, and the SEZ/IFSC Unit regulations. The framework is robust, globally aligned, and designed to facilitate cross-border capital market activities while ensuring strong regulatory oversight.

This note consolidates the key requirements, governance expectations, and operational compliance obligations.

IFSCA Regulations – Capital Market Intermediaries (CMI) Regulations, 2025

IFSCA functions as the unified regulator for all capital-market intermediaries in IFSC. A Broker-Dealer is authorised under the Capital Market Intermediaries (CMI) Regulations, 2025.

Authorisation & Eligibility

• Incorporation of an eligible entity (Company / LLP / Foreign Body Corporate Branch).
• Prior SEZ Unit approval (LOA) before applying to IFSCA.
• Fit-and-Proper criteria for promoters, directors, and key functionaries.
• Minimum net worth / deposit requirements as prescribed by the recognised exchange and CMI framework.
• Application routed through the recognised stock exchange (India INX or NSE IFSC).

Governance Framework

A Broker-Dealer must establish strong governance and control standards:

Appointment of:

• Principal Officer (5+ years relevant experience)
• Compliance Officer exclusively responsible for regulatory compliance

Adoption of board-approved policies, including:

• AML/CFT & KYC Policies
• Code of Conduct
• Risk Management Framework
• Cybersecurity & IT Governance
• Business Continuity & Disaster Recovery (BCP/DR)
• Outsourcing Policy
• Conflicts of Interest Management

Establishment of MIS, reporting architecture, exception logs, and audit trails.

Client Eligibility & Onboarding Requirements

Only eligible categories of investors may be serviced:

• Non-residents, NRIs, global intermediaries, and eligible resident investors under LRS/FEMA conditions.
• Full KYC & CDD documentation aligned with IFSCA KYC Regulations, PMLA, and global sanctions frameworks.
• Unique Client Codes, client-level margin, suitability/appropriateness checks for complex products.

Conduct of Business Requirements

• Segregation of client funds and proprietary funds.
• Risk disclosures, leverage disclosures, product-level disclosures.
• Fair and orderly dealing, avoidance of conflict of interest, and prohibition of market manipulation.
• Proper time-stamped order records, electronic audit trails, and order-handling controls.

Risk Management, Technology & Cybersecurity

The firm must maintain:

• Exchange-prescribed and IFSCA-mandated risk controls, marginal systems, and position-limit monitoring.
• Pre-trade risk controls and approval processes for algorithmic trading, if used.
• A robust Cybersecurity Framework, periodic system audits, and BCP/DR testing.

Reporting & Regulatory Filings

• Monthly, quarterly, and annual filings relating to turnover, net worth, client profile, risk exposures, complaints, and financials.
• Event-based filings: changes in shareholding, board/KMPs, system migrations, breaches, cyber incidents.
• Annual compliance report, internal audit report requirements in GIFT IFSC, system audit, and AML audit.

Global Access Compliance (If Applicable)

Where the broker provides global access:

• Enhanced disclosures for clients on foreign regulatory protections.
• Suitability assessments for cross-border products.
• Exchange-issued NOC and additional governance checks.

Exchange-Level Compliances – India INX

Membership on India INX requires adherence to:

• Exchange Rules, By-laws, Regulations, and IFSCA circulars.
• Eligibility norms, technology standards, and deposit requirements.

Key India INX Compliance Obligations

• Execution of membership agreements and submission of security deposits.
• Regular filings, including:
  • Net worth certificates
  • Audited financials
  • System audit & cyber audit
  • Internal audit reports
  • Client complaints & arbitration statements
  • Risk management returns
• Participation in surveillance interactions, mock trading sessions, DR drills, and on-site inspections.
• Reporting of user IDs, terminals, algo setups, and infrastructure changes.

Exchange-Level Compliances – NSE IFSC (NSE IX)

NSE IFSC has a structured membership framework with strict monitoring.

Key Requirements

• Membership eligibility criteria including financial capability, system setup, and risk infrastructure.
• Filings through the ENIT portal, including:
  • Membership updates
  • Net worth and capital adequacy
  • Internal audit and system audits
  • Periodic compliance certificates
• Execution of membership agreements with NSE IFSC and its clearing corporation.
• Compliance with margin, exposure norms, surveillance directives, and operational guidelines.
• Participation in mock testing, connectivity checks, and cyber resilience requirements.

SEZ / IFSC Unit Regulatory Compliances

As the entity operates within a Special Economic Zone (SEZ), approval as an IFSC Unit is mandatory.

Pre-Operational Requirements

• Application for Letter of Approval (LOA) from the SEZ Administrator (IFSCA).
• Execution of Bond-cum-Legal Undertaking (BLUT).
• Creation of SEZ-specific books of accounts, asset registers, and bank accounts.

Ongoing SEZ Obligations

Filing of:

• Monthly Performance Reports (MPR)
• Annual Performance Reports (APR) including NFE calculations

Approvals for:

• Capital goods import / domestic procurement
• Removal of goods/equipment
• Space modification, expansion, or exit

Maintenance of records for SEZ inspections, asset tracking, and foreign exchange monitoring.

Additional Compliances Often Overlooked

AML/CFT Advanced Requirements

• Registration with FIU-IND for AML reporting.
• Filing of STRs, CTRs, NTRs where applicable.
• Annual AML review and training for staff.

FATCA / CRS Readiness

• Ensuring readiness for FATCA/CRS classification for certain foreign clients.

Data Localization & Cross-Border Data Transfer

• Compliance with IFSCA Cybersecurity Guidelines and India’s DPDP Act (where applicable).
• Declaration on offshore servers / cloud hosting, if used.

HR & Employment Compliance

Applicable within SEZ:

• IFSC employment contracts
• Required labour documentation
• Mandatory employee training on AML, cybersecurity, and conduct

Conclusion: Compliance as a Strategic Advantage in GIFT IFSC

The compliance framework for Broker-Dealers in GIFT IFSC spans IFSCA regulations, exchange-level obligations, SEZ requirements, and ongoing governance controls. Adhering to these standards strengthens operational integrity, client trust, and regulatory alignment, enabling firms to operate confidently in a globally integrated financial centre.

Need assistance with Broker-Dealer setup or compliance in GIFT IFSC? Get in touch today.