Distribution of Capital Market Products in GIFT IFSC – Guidance from the IFSCA

LGT Wealth India Private Limited (“LGT”), vide an application dated 06 June 2025, sought guidance from IFSCA under the IFSCA (Informal Guidance) Scheme, 2024 regarding distribution of capital market products and services (such as funds launched by other entities in the IFSC) to eligible clients through its head office in Mumbai or through its IFSC Branch which is registered with IFSCA as a Registered FME (Non-Retail)under the International Financial Services Centres Authority (Fund Management) Regulations, 2025 (“FM Regulations”) in GIFT IFSC. Our note analyses the responses given by IFSCA vide its interpretive letter dated 20 August 2025.

LGT is registered with SEBI as a Portfolio Manager and is also registered as a Distributor of Mutual Funds and PMS products with APMI (Association of Portfolio Managers in India) and AMFI (Association of Mutual Funds in India). LGT also has a branch in IFSC which is registered as a Registered FME (Non-Retail) (“IFSC Branch”).

Query 1: Whether LGT, which is registered with SEBI as a Portfolio Manager and with relevant distribution bodies, may distribute financial products registered with IFSCA?

Response: IFSCA’s response clarifies that an entity which is registered in its home jurisdiction as a distributor may be eligible to distribute capital market products and/or services in GIFT IFSC provided it complies with the ‘Code of Conduct’ specified under the IFSCA ( Capital Market Intermediaries) Regulations, 2025 (“IFSCA Capital Market Regulations”); and takes all reasonable steps to avoid conflicts of interest and develop appropriate policies in order to prevent them from adversely affecting the interests of the clients.

Query 2: Whether the IFSC Branch may distribute financial products registered with IFSCA

Response: IFSCA’s response clarifies that an FME regulated by IFSCA will have to seek a separate registration with IFSCA under the IFSCA Capital Market Regulations as a distributor to distribute capital market products and/or services in GIFT IFSC. If the IFSC Branch seeks to register as a distributor, IFSCA may further impose certain conditions to ensure that the conflicts of interest are mitigated.

1. IFSCA’s responses clarify that distributors who do not have a presence in GIFT IFSC, but who have already obtained registration from the regulators of their jurisdictions can distribute capital market products of issuers located in GIFT IFSC (“GIFT IFSC Products”) provided they comply with the Code of Conduct specified under the IFSCACapital Market Regulations and ensure there’s sufficient ring fencing to prevent conflicts of interest situations from adversely affecting their clients. This clarification is a positive move since it will not only allow GIFT entities to access the clientele of distributors who do not have a presence inside GIFT IFSC and increase the reach of their products but also reduce the operational costs of the distributor having to obtain another registration to distribute products launched in GIFT IFSC.
2. If one compares the regulations applicable to distributors registered with and regulated by AMFI and AMPI with IFSCA’s regulation of distributors under the IFSCACapital Market Regulations, one observes the following variations in standards: 
1. Net Worth Requirements: Under the IFSCACapital Market Regulations, a distributor should have a net worth of USD 50,000. A registered FME intending to be a distributor should have a separate net worth of USD 50,000 in addition to the net worth required for its other activities. AMFI and APMI do not prescribe any net worth requirements.
2. Key Personnel: Under IFSCACapital Market Regulations, a distributor should appoint a Principal Officer and a Compliance Officer in the IFSC. The Principal Officer must have a-
1.  professional qualification or a post-graduate degree/diploma (minimum one year) in fields like finance, law, accountancy, business management, commerce, economics, etc., and at least five years of experience in related activities; or 
2. a graduate degree in any field from a university, or an institution recognized by the Central Government or any State Government with at least ten years of experience in the financial services market; 
3. or a graduate degree along with a certification as a Certified Financial Planner from Financial Planning Standards Board. 

The Compliance Officer may be a person with the qualifications mentioned in 2 (ii)(a) and (b) or have a Bachelor of Law degree from a university recognized by the Central/State/foreign university. AMFI and APMI require distributors (or a key employee of the distributor) to have passed the NISM-Series V-A: Mutual Fund Distributors Certification Examination (“AMFI NISM Examination”) and the NISM XXIA exam (“APMI NISM Examination”) respectively. 

3. Fees:
   1. Under IFSCACapital Market Regulations, to obtain a distributor’s license, an application fee of USD 750 and a registration fee of USD 2,000 is payable. Further a yearly fee of USD 2,000 will also be payable.
   2. Registration fees payable to AMFI range from Rs. 3,000 for individuals to Rs. 40,000 for corporates to Rs. 4,00,000 for banks. AMFI’s renewal fees are 50% of the registration fees. AMFI’s license is co-terminus with the validity of the AMFI NISM Examination, which is 3 years, and hence shall be renewed every three years.
   3. Registration fees payable to APMI range from Rs. 500 for individuals to Rs. 5,000 for corporates and to Rs. 1,00,000 for banks. APMI’s distributor license validity coexists with the validity of the APMI NISM Examination which is 3 years.