Alerts & Updates 17th Dec 2024

An Overview of the International Financial Services Centres Authority (Informal Guidance) Scheme, 2024

Authors

Vinod Joseph Partner | Mumbai
Akhil Ganatra Advocate | Gift City

Latest Thought Leadership

News & Media 12th Feb 2025

Tax relief for homeowners with two houses: You can now show both properties as self-occupied to avoid notional rent on the second house

Read More
News & Media 12th Feb 2025

New Income Tax Bill 2025: This may still undergo several changes sooner than later

Read More
Articles 12th Feb 2025

Self-Revision Mechanism Post Clearances: A Transformative Shift under Customs

Read More
News & Media 12th Feb 2025

TNOGA’s ‘Blank Hours’ regulation will push users to illegal gambling platforms, experts raise concerns

Read More

  • The International Financial Services Centres Authority (IFSCA) issued a circular on December 03, 2024, to implement the International Financial Services Centres Authority (Informal Guidance) Scheme, 2024 (Scheme) with effect from January 1, 2025. The objective of the scheme is to provide clarity and guidance on regulatory matters within the financial services market which helps the stakeholders to make informed and compliant decisions.

  • Applicability and Eligibility

    The scheme enables eligible persons to submit a written request seeking informal guidance from the IFSCA under the Scheme. To be eligible to seek guidance from the IFSCA under the Scheme, a person must be:

    • registered, recognized, or authorized by the IFSCA.
    • intending to engage in business transactions related to financial products or services regulated by the IFSCA.
    • intending to establish a unit in an International Financial Services Centre (IFSC).
    • specifically permitted to do so by the IFSCA.
  • Types of Informal Guidance

    The scheme offers two main types of informal guidance:

    • No-Action Letters inform the applicant whether the department would recommend any action to the IFSCA against a proposed business activity or transaction under the relevant Acts, Rules, Regulations, or Guidelines administered by the IFSCA.
    • Interpretive Letters provide interpretations on specific provisions of the legal framework administered by the IFSCA, as well as interpretations of guidelines or directions from entities like RBI, SEBI, IRDAI, and PFRDA.
  • Application for Informal Guidance

    To seek informal guidance under this Scheme, applicants must submit an electronic application through the IFSCA’s Single Window IT System (SWITS). Applications should clearly specify whether the request is for a No-Action Letter or an Interpretive Letter. A fee of USD 1000 is payable through SWIFT or any other payment method that the IFSCA may specify. 75% of this fee is treated as guidance fee and the balance 25% as processing fee. Applicants are required to disclose all relevant facts, legal provisions, and the link between their business activities in the IFSC and the guidance being sought.

  • Review of application by IFSCA

    Upon receiving the application, the concerned department will review it and may request the applicant for additional information or clarifications. The applicant shall respond to such a request within 15 days, or the application may be rejected by the IFSCA. If more time is needed for the response, the department may allow an extension to the applicant for the same.

    The department shall endeavour to process the application within 30 days, excluding the time taken for the applicant’s response to any requests for additional information. The department’s internal records and views on the matter will remain confidential.

  • Requests which may not be entertained by the Departments

    The Scheme has outlined specific situations in which requests for informal guidance will not be considered. These include:

    • General queries: If the application is vague and lacks a complete and clear factual description.
    • Hypothetical situations: Applications based on hypothetical or speculative scenarios.
    • Lack of interest: If the applicant has no direct or immediate interest in the matter.
    • Missing Legal provisions: Applications that do not cite the applicable legal provisions.
    • Previously issued guidance: If a similar query has already been addressed by the IFSCA in a past informal guidance letter.
    • Ongoing investigations or enforcement: Guidance requests related to cases under investigation or enforcement.
    • Sub-judice issues: Applications related to matters pending before a court or tribunal.
    • Policy concerns: If responding to the query would raise policy concerns, the Department may choose not to provide guidance.
    • Other specific cases: The Department may also refuse guidance in other cases deemed appropriate based on its discretion.

    In such cases, the guidance fee (which forms 75% of the total fees) paid by the applicant shall be refunded and the processing fee (which forms 25% of the total fees) shall be retained by the IFSCA.

    Once guidance is issued under the scheme, it shall be published on the IFSCA’s official website. However, if an applicant requests confidentiality due to the sensitivity of business decisions or transactions, the concerned department of IFSCA shall ensure the guidance remains confidential for up to 90 days from the date of issuance of guidance. Additionally, upon the applicant’s request, specific details, including names, can be redacted before uploading the same on the website.

    It is crucial to understand that the guidance issued by the IFSCA under this Scheme is non-binding. The letters issued, shall not be interpreted as definitive rulings on legal or factual questions, nor as orders from the Authority. They are not subject to appeal, and the Authority will not be held liable for any losses or damages resulting from delays or changes in the guidance provided. While these letters reflect the views of the relevant department with the IFSCA, they do not bind the IFSCA, though the IFSCA may choose to follow such guidance in practice.

    If the IFSCA discovers that informal guidance has been obtained through fraudulent means or misrepresentation of facts, it may declare such guidance as invalid. This could result in the applicant’s case being reassessed as if the guidance had never been issued. In such instances, the Authority may take appropriate legal action against the applicant.

  • ELP Comments

    The objective, principles and terms of the Scheme are very similar to those of the SEBI Informal Guidance Scheme, 2003 (SEBI Scheme). Both schemes aim to provide regulatory clarity and facilitate informed decision-making for eligible entities. One distinction between these schemes is that the IFSCA’s Scheme explicitly requires applicants to demonstrate a clear link between the guidance sought and their existing or proposed activities within the International Financial Services Centre (IFSC), while the SEBI Scheme does not expressly impose this requirement. However, reading the SEBI Scheme between the lines, it is clear that SEBI also expects applicants to establish such a clear connection before seeking informal guidance. This requirement is designed to maintain specificity and prevent misuse of the scheme for hypothetical or overly broad queries.

    We hope you have found this information useful. For any queries/clarifications please write to us at insights@elp-in.com  or write to our authors:

    Vinod Joseph, Partner – Email – vinodjoseph@elp-in.com

    Akhil Ganatra, Advocate – Email – akhilganatra@elp-in.com

     

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein

Privacy Policy

As per the rules of the Bar Council of India, lawyers and law firms are not permitted to solicit work or advertise. By clicking on the "I Agree" button, you acknowledge and confirm that you are seeking information relating to Economic Laws Practice (ELP) of your own accord and there has been no advertisement, personal communication, solicitation, invitation or any other inducement of any sort whatsoever by or on behalf of ELP or any of its members to solicit any work through this website.