IFSCA Increases Scrutiny of Capital Market Intermediaries in GIFT IFSC

The International Financial Services Centres Authority (IFSCA) has heightened its regulatory oversight of capital market intermediaries (CMIs) in Gujarat’s GIFT City to address issues of non-compliance.  

This initiative aligns with IFSCA's commitment to maintaining high regulatory standards and ensuring a transparent financial ecosystem. 

IFSCA's Compliance Oversight in GIFT City 

IFSCA has conducted market intelligence visits at the premises of CMIs in GIFT IFSC to verify compliance with regulatory standards.  

These inspections revealed several instances of non-compliance, including unattended offices during business hours, absence of key personnel like the Principal Officer or Compliance Officer, and inadequate infrastructure. 

During these visits, some CMIs encountered issues such as using remote-access trading software, conflicting roles where a Compliance Officer was also involved in trading activities, and repeated non-compliance despite receiving warnings. 

Regulatory Action and Concerns 

IFSCA initiated regulatory actions against non-compliant CMIs after identifying these issues. A recent batch of show-cause notices (SCNs) surpassed previous levels, which raised concerns among businesses in GIFT City. The visits primarily took place from late February to early March 2026. 

Commitment to Regulatory Standards 

IFSCA's enforcement measures are intended to uphold regulatory standards necessary for a burgeoning financial hub.  

Maintaining a verifiable presence and proper infrastructure helps ensure that tax incentives promote genuine economic activity rather than just benefiting from tax advantages. 

Read More: Gift City’s First Ever IPO: XED Executive Development IPO Set to Open on March 6! 

Supporting Genuine Economic Activity 

The emphasis on operational substance aims to curb misuse of tax incentives. Under Section 80LA of the Income Tax Act, eligible units can claim a 100% tax deduction on certain profits.  

IFSCA’s focus is to ensure such benefits support real economic activity rather than nominal setups. 

Conclusion 

IFSCA’s increased regulatory scrutiny in GIFT IFSC aims to address compliance issues amongst CMIs while supporting the region's image as a transparent and robust financial hub. This step is viewed as essential in balancing regulatory oversight with the practical realities of a rapidly growing financial centre. 

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