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The Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015 has been enacted to provide regulations, procedures, and guidelines for international financial services centres and for other related matters.

Brief History of the Guidelines

The Securities and Exchange Board of India (SEBI) has notified the SEBI (International Financial Services Centres) Guidelines, 2015 by powers granted under Section 11 of the SEBI Act, 1992, Sections 4 and 8A of the Securities Contracts (Regulation) Act, 1956 read with Section 18 of the Special Economic Zones Act, 2005 on 27th March, 2015.

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Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015

Table of Contents

1. Important Definitions

Domestic Company means a company and includes a body corporate or corporation established under a Central or State legislation for the time being in force.

Financial Institution includes a company, firm, association of persons, body of individuals, whether incorporated or not or any artificial juridical person, not falling within any of the preceding categories engaged in rendering financial services in securities market or dealing in securities market in any manner.

Financial Services means activities, a financial institution is allowed to carry out as specified in the respective Act of the Parliament or by the Government of India or by any regulatory authority empowered to regulate the concerned financial institution.

Foreign Jurisdiction means a country, other than India, whose securities market regulator is a signatory to International Organization of Securities Commissions Multilateral Memorandum of Understanding (IOSCO’s MMOU) (Appendix A signatories) or a signatory to bilateral Memorandum of Understanding with the Board, and which is not identified in the public statement of Financial Action Task Force as a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply or a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.

Intermediary means and includes a stock broker, a merchant banker, a banker to an issue, a trustee of trust deed, a registrars to an issue, a share transfer agent, an underwriter, an investment adviser, a portfolio manager, a depository participant, a custodian of securities, a foreign portfolio investor, a credit rating agency, or any other intermediary or any person associated with the securities market, as may be specified by the Board from time to time.

International Financial Services Centre has the same meaning as assigned to it under the Special Economic Zones Act, 2005.

Issuer means a company incorporated in India seeking to raise capital in foreign currency other than Indian rupee which has obtained requisite approval under Foreign Exchange Management Act, 1999 (FEMA) or exchange control regulations as may be applicable, or a company incorporation in a foreign jurisdiction.

Recognised Entity means any intermediary which is registered with the Board or registered or recognised with a regulator of a foreign jurisdiction. Such entities have to comply with fit and proper norms specified by the Board.

2. Applicability and Scope

Any entity desirous of organising or assisting in organising any stock exchange or clearing corporation or depository, or desirous of undertaking any other financial services relating to securities market, has to be a recognised entity and such an entity has to seek permission of the Board in accordance with the norms specified herein or as may be specified by the Board, from time to time.
Any entity desirous of operating in an International Financial Services Centre for rendering financial services relating to securities market, has to comply with the provisions relating to registration or recognition, as the case may be, of applicable regulations of the Board. Certain entities are permitted to operate in the International Financial Services Centre subject to these guidelines.
Save as otherwise provided in these guidelines or as specified by the Board from time to time, all provisions of securities laws, apply to a financial institution operating in an International Financial Services Centre.
These guidelines are subject to the guidelines of the Government of India on foreign investment.

3. Guidelines for Stock Exchanges, Clearing Corporations and Depositories

Any Indian recognised stock exchange or any stock exchange of a foreign jurisdiction may form a subsidiary to provide the services of stock exchange in International Financial Services Centre where at least 51% of paid up equity share capital is held by such exchange and remaining shares may be offered to any other recognised stock exchange, whether Indian or of foreign jurisdiction.
Any Indian recognised stock exchange or clearing corporation, or any recognised stock exchange or clearing corporation of a foreign jurisdiction may form a subsidiary to provide the services of clearing corporation in International Financial Services Centre where at least 51% of paid up equity share capital is held by such stock exchange or clearing corporation, and remaining shares may be held by any other recognised stock exchange or clearing corporation, whether Indian or of foreign jurisdiction.
Any Indian registered depository or any regulated depository of a foreign jurisdiction may form a subsidiary to provide the depository services in International Financial Services Centre where at least 51% of paid up equity share capital is held by such depository and remaining shares may be offered to any other registered depository or recognised stock exchange or clearing corporation, whether Indian or of foreign jurisdiction.
Every person who acquires equity shares of a recognised stock exchange or recognised clearing corporation or registered depository in International Financial Services Centre has to inform the Board within 15 days of such acquisition.
Every permitted stock exchange has to have a minimum net worth equivalent of INR 25 crores initially and it has to enhance its net worth to a minimum equivalent of INR 100 crores over the period of 3 years from the date of approval.
Every permitted clearing corporation has to have a minimum net worth equivalent of INR 50 crores initially and it has to enhance its net worth to a minimum equivalent of INR 300 crores over the period of 3 years from the date of approval.
Every permitted depository has to have a minimum net worth of INR 25 crores and it has to enhance its net worth to a minimum equivalent of INR 100 crores over the period of 3 years from the date of approval.
The provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 that every recognised stock exchange has to credit 25% of its profits every year to the Fund, of the recognised clearing corporations which clears and settles trades executed on that stock exchange cannot be applicable to the stock exchanges operating in International Financial Services Centre.
The provision of SEBI (Depositories and Participants) Regulations, 1996 that every depository has to credit 25% of profits every year to the investor protection fund cannot be applicable to the depositories operating in International Financial Services Centre.
All the transitory provisions or relaxations that were provided to the stock exchanges and clearing corporations to comply with Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 are not applicable to stock exchanges and clearing corporations operating in the International Financial Services Centre.
Provisions of Chapter IIA of SEBI (Depositories and Participants) Regulations, 1996 and Chapter V of Securities Contracts (Regulation) (Stock Exchanges And Clearing Corporations) Regulations 2012 cannot apply to depositories, stock exchanges, clearing corporations in International Financial Services Centre, as the case may be. Depositories, stock exchanges, clearing corporations operating in International Financial Services Centre have to adopt the broader principles of governance prescribed by International Organization of Securities Commissions and principles for Financial Market Infrastructures and such other governance norms as may be specified by the Board, from time to time.
The stock exchanges operating in International Financial Services Centre may permit dealing in following types of securities and products in such securities in any currency other than Indian rupee, with a specified trading lot size on their trading platform subject to prior approval of the Board including equity shares of a company incorporated outside India, depository receipts, debt securities issued by eligible issuers, currency and interest rate derivatives, index based derivatives and such other securities as may be specified by the Board.

4. Guidelines for Intermediaries

Any recognised entity or entities desirous of operating in International Financial Services Centre as an intermediary, may form a company to provide such financial services relating to securities market, as permitted by the Board.
Any intermediary permitted by the Board for operating within the International Financial Services Centre have to provide financial services to the following categories of clients including a person not resident in India, a non-resident Indian, a financial institution resident in India who is eligible under the Foreign Exchange Management Act to invest funds offshore, to the extent of outward investment permitted and a person resident in India who is eligible under Foreign Exchange Management Act, to invest funds offshore, to the extent allowed under the Liberalized Remittance Scheme of Reserve Bank of India, subject to a minimum investment as specified by the Board from time to time.
Any intermediary permitted by the Board for operating within the International Financial Services Centre has to, for the purpose of enforcing compliance with regulatory requirements, appoint a senior management person as Designated Officer.
In order to avail investment advisory or portfolio management services in International Financial Services Centre, the client has to be a person resident outside India, a non-resident Indian, a financial institution resident in India who is eligible under Foreign Exchange Management Act to invest funds offshore, to the extent of outward investment permitted, a person resident in India having a net worth of at least USD 1 million during the preceding financial year who is eligible under Foreign Exchange Management Act to invest funds offshore, to the extent allowed in the Liberalized Remittance Scheme of Reserve Bank of India.
A portfolio manager operating in the International Financial Services Centre has to be permitted to invest in securities which are listed in International Financial Services Centre, securities issued by companies incorporated in International Financial Services Centre and securities issued by companies belonging to foreign jurisdiction.

5. Guidelines for Issue of Capital

Domestic companies intending to raise capital, in a currency other than Indian Rupee, in an International Financial Services Centre have to comply with the provisions of Foreign Currency Depository Receipts Scheme, 2014 notified vide F. No. 9/1/2013-ECB by Government of India.
Companies of foreign jurisdiction, intending to raise capital, in a currency other than Indian Rupee, in an International Financial Services Centre have to comply with the provisions of the Companies Act, 2013 and relevant provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 as if the securities are being issued under the said regulations, as may be applicable.
Companies, domestic or of foreign jurisdiction, may list and trade their securities as per norms specified by the Board.

6. Guidelines for Issue of Debt Securities

No issuer is eligible to issue debt securities, unless the following criterion are complied with which includes that the issuer is eligible to issue debt securities as per its constitution, the issuer should not have been debarred by any regulatory authority in its home jurisdiction or any other jurisdiction, where it is operating or has raised any capital, the issuer or its directors should not be convicted of any economic offence in its home jurisdiction or any other jurisdiction where it is operating or has raised any capital and any other criteria as may be specified by the Board.
The minimum subscription amount in case of private placement per investor cannot be less than USD 100,000 or equivalent or such amount as may be specified by the Board from time to time.
An issuer desirous of issuing debt securities has to make an application for listing of such debt securities to one or more stock exchanges set up in the International Financial Services Centre.
The requirements such as appointment of trustee, creation of debenture redemption reserve etc. has to be as specified by the Board from time to time.
Advertisements for debt issues within the International Financial Services Centre may be made in any print media.
For debt issues within the International Financial Services Centre, the credit rating may be obtained either from a recognized credit rating agency registered with the Board or from any other credit rating agency registered in a foreign jurisdiction.
An issuer of debt securities has to enter into an agreement with a depositary or custodian eligible to operate in International Financial Services Centre for issue of the debt securities, for the purpose of holding and safekeeping of such securities and also to facilitate transfer, redemption and other corporate actions in respect of such debt securities.
Necessary disclosures regarding appointment of depositary or custodian have to be made in the information memorandum. Where the issuer has a registered office or branch office in International Financial Services Centre, it may service investors from such office and need not appoint a depositary or custodian.
The issuer of debt securities in an International Financial Services Centre has to prepare its statement of accounts in accordance with Companies Act, 2013 as applicable in International Financial Services Centre.
The issuer has to comply with the continuous listing requirements including corporate governance and such other conditions as specified in the listing agreement, entered into between the issuer and the stock exchange where such debt securities are sought to be listed. Where the securities of the issuer are already listed on another stock exchange whether foreign or domestic, and it complies with listing agreement in respect of such securities, the Board may modify or relax certain conditions or requirements with regard to listing agreement in respect of debt securities issued under these guidelines.
The debt securities listed in stock exchanges have to be traded on the platform of the stock exchange and such trades have to be cleared and settled through a clearing corporation set up in International Financial Services Centre as specified.

7. Guidelines for Funds

In order to make an investment in an alternative investment fund or a mutual fund operating in International Financial Services Centre, the investor has to be a person resident outside India, a non-resident Indian, institutional investor resident in India who is eligible under the Foreign Exchange Management Act to invest funds offshore, to the extent of outward investment permitted, person resident in India having a net worth of at least USD 1 million during the preceding financial year who is eligible under the Foreign Exchange Management Act to invest funds offshore, to the extent allowed in the Liberalized Remittance Scheme of Reserve Bank of India.
Any alternative investment fund or mutual fund operating in the International Financial Services Centre can accept money only from eligible investors in foreign currency.
Any alternative investment fund or mutual fund operating in the International Financial Services Centre has to be permitted to invest in securities which are listed in International Financial Services Centre, securities issued by companies incorporated in International Financial Services Centre and securities issued by companies belonging to foreign jurisdictions.
An asset management company of a mutual fund operating in an International Financial Services Centre has to have a net worth of not less than USD 2 million which has to be increased to USD 10 million within 3 years of commencement of business in International Financial Services Centre.
The requirements such as appointment of trustee, custodian, manager, etc., has to be as specified by the Board.
The requirements regarding raising of funds in foreign currency such as minimum investment amount, minimum corpus of fund, disclosures, investment conditions, valuations, types of schemes, professional qualifications, etc., have to be as specified by the Board.

8. Miscellaneous Guidelines

Every issuer, domestic company or a company of foreign jurisdiction or financial insti- tution or intermediary, as the case may be, to whom these guidelines apply, has to maintain the books, records and documents as per the applicable regulations notified by the Board.
Any contravention of these guidelines have to be dealt with by the Board in accordance with the securities laws.
For the purposes of implementation of these guidelines and matters incidental thereto, or in order to facilitate and regulate financial services relating to securities market in an International Financial Services Centre, the Board may specify norms, procedures, processes, manners or provide relaxations, by way of guidance notes or circulars.
In order to remove any difficulties in the interpretation or application of the provisions of these guidelines, or in order to facilitate and regulate financial services relating to securities markets in an International Financial Services Centre, the Board has to have the power to issue clarifications through guidance notes or circulars.

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