IFSCA Tightens Scrutiny of Fund Managers and Market Intermediaries in GIFT City

The International Financial Services Centres Authority (IFSCA) has issued show-cause notices to nearly 10 entities, including fund management entities (FMEs) and capital market intermediaries (CMIs), over suspected regulatory breaches.  

Reports suggest that the notices seek explanations for lapses identified during supervisory reviews, with failure to respond potentially leading to action such as licence cancellation. 

Gaps Flagged During Inspections 

Recent supervisory visits highlighted multiple areas of non-compliance among CMIs. These included the absence of key personnel such as a principal officer or compliance officer, inadequate physical infrastructure, and trading activities conducted through remote access. 

The regulator said action has been initiated in line with the existing framework based on these findings. Most of the issues relate to inspections carried out over the past 2 years. 

Earlier Warnings on Operational Requirements 

In 2024, the authority had issued advisories to several entities for failing to meet “substance requirements”. These cover minimum employee presence and operational thresholds within the International Financial Services Centre. 

The current round of enforcement builds on those earlier observations, with closer monitoring of how firms maintain on-ground operations in Gujarat International Finance Tec-City. 

Expanding Ecosystem Under Scrutiny 

Activity in GIFT City has increased in recent years. As of December 2025, over 200 FMEs were operating in the IFSC, managing around 300 schemes with commitments exceeding $32 billion. 

Alongside enforcement, the regulator is preparing a framework that maps specific non-compliances to corresponding penalties for IFSC units. 

Industry Responses and Process Underway 

Entities that have received notices are in the process of submitting responses. The issues flagged are largely operational in nature, according to reports. Some entities are understood to have already addressed gaps identified during inspections. 

In cases where settlement options are not pursued, matters may proceed through adjudication and hearings with the regulator. 

Read More: Indian Steel Market Sees 18-25% Price Increase Following Extended Safeguard Duty! 

Conclusion 

The latest actions indicate tighter supervision as the IFSC ecosystem expands, with regulatory focus on adherence to operational and compliance requirements. 

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