SEBI Eases Entry for Stock Brokers into GIFT-IFSC with New SBU Framework [Read Circular]

The Securities and Exchange Board of India (SEBI) issued a circular dated May 2, 2025, introducing a new framework that simplifies the entry of SEBI-registered stock brokers into the Gujarat International Finance Tec-City International Financial Services Centre (GIFT-IFSC). The new guidelines allow stock brokers to establish operations in GIFT-IFSC through a Separate Business Unit (SBU) without requiring prior SEBI approval — a shift expected to streamline processes and encourage broader participation in the international financial ecosystem.

Background

GIFT-IFSC (Gujarat International Finance Tec-City – International Financial Services Centre) is India’s flagship project to attract international financial services. SEBI aims to streamline and ease the regulatory process for Indian stock brokers wishing to operate in this financial zone.

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Key Provisions

1. Elimination of Approval Requirement

• SEBI-registered stock brokers no longer need prior SEBI approval to operate in GIFT-IFSC.
• They are now allowed to set up operations there as a Separate Business Unit (SBU) under the same legal entity.

2. Modes of Operation

• Brokers can choose from:
• Setting up an SBU (either a branch or business unit under the same entity).
• Continuing the existing model of operating via a subsidiary.
• Flexibility is provided in choosing the form of operation.

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Safeguards and Regulatory Ring-Fencing

SEBI prescribes key conditions to ensure that the Indian and IFSC operations remain distinct:

5.1 – Segregation of Activities

• Indian market activities must be ring-fenced from those in GIFT-IFSC.
• An arms-length relationship must be maintained.

5.2 – Exclusive Functionality of SBU

• SBUs must only carry out activities permitted by the IFSCA (International Financial Services Centres Authority).

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5.3 – Separate Accounting

• Maintain a separate set of accounts for the SBU on an arms-length basis.

5.4 – Net Worth Separation

• The SBU’s net worth should be distinct from that of the Indian operations.
• Net worth compliance for the Indian broker must exclude the SBU’s account.

SEBI clarified that the Investor Protection Fund (IPF) and its SCORES grievance redressal mechanism will not apply to activities undertaken in GIFT-IFSC. Investors must rely on IFSCA’s framework for dispute resolution and protection.

Transition Option for Existing Entities Brokers who have previously established subsidiaries or joint ventures in GIFT-IFSC under SEBI’s older approval system can now opt to dismantle those entities and operate under the new SBU framework. This flexibility aims to reduce structural redundancies and encourage unified compliance under the broker’s main entity.

To Read the full text of the Order CLICK HERE

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