Alerts & Updates 17th Dec 2024
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.
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:
The scheme offers two main types of 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.
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.
The Scheme has outlined specific situations in which requests for informal guidance will not be considered. These include:
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.
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
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