IFSCA releases Circular Monitoring of Investments from Countries Sharing Land Border with India

20 Feb 2024
  • DMD Advocates
  • Blog

The Government of India notified the Foreign Exchange Management (Non-debt Instruments) Amendment Rules, 2024 (NDI Rules) and the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 on January 24, 2024, enabling direct listing of equity shares by public Indian companies on the International Exchanges at the GIFT International Financial Services Centre (IFSC).

Pursuant to the aforesaid notification, the International Financial Services Centres Authority (IFSCA) released a Circular for Direct Listing of Indian companies on the stock exchanges in IFSC – Monitoring of investments from countries sharing land border with India, dated February 9, 2024 (Circular). The Circular lays down the compliance mechanism for stock exchanges, broker dealers, depository, the depository participants, and custodians (hereinafter referred to as the Market Infrastructure Institutions/MIIs). The Circular is to be complied with, by the holders of equity shares of companies listed on International Exchange, including their beneficial owners, with proviso to clause 2 of Schedule XI of the NDI Rules.

The highlights of the Circular are enumerated here:

1. Know Your Customer (KYC) and Client Due Diligence (CDD) by Broker Dealers, Depository Participants and Custodians
• All MIIs will be required to conduct KYC & CDD including identification of beneficial owners, in accordance with IFSCA (Anti Money Laundering, Counter Terrorist Financing and Know Your Customer) Guidelines, 2022.
• The MIIs will maintain a list of the client who is a citizen of a country sharing land border with India, incorporated in a country sharing land border with India, or is a beneficial owner of the client situated in or is a citizen of a country sharing land border with India. It must be prepared within 30 days from the notification of the Circular and shared with the respective stock exchanges and depository in the IFSC.
• The list of clients must be updated every time a new client is onboarded and such updation must be informed to the depository and stock exchange within one working day.

2. Declaration by Clients
• Clients from countries sharing land border with India will be required to provide a signed declaration that they shall not hold equity shares of a public Indian company, listed or proposed to be listed on a IFSC stock exchange, without prior approval of the Central Government. The declaration will be taken at the time of initial onboarding and at the time of periodic updation of CDD.
• Clients from other countries will provide a declaration at the time of onboarding and updation of CDD that neither the client nor any of its beneficial owners, is situated in or is a citizen of a country sharing land border with India.

3. Primary Market Issuance: The recognised stock exchanges in the IFSC shall have adequate mechanisms to ensure that the identified Clients do not participate in the primary market issuance of equity shares of Indian companies listed on the recognised stock exchanges in the IFSC, without approval of the Central Government.

4. Secondary Market Trading: Broker dealers and custodians in the IFSC must ensure that their Identified Clients do not buy any equity shares of the Indian companies listed on IFSC recognised stock exchanges without the approval of the Central Government.

5. Off-Market Transfer: The depository in the IFSC will ensure that the Identified Clients do not hold equity shares in Indian companies listed on the recognised stock exchanges in IFSC, without the prior approval of Central Government, through off-market transfer.

6. Monitoring and Surveillance by stock Exchanges: The IFSC recognised stock exchanges will conduct market surveillance to monitor trading activity by Identified Clients in the secondary market and submit the report to the IFSCA on a monthly basis.

To access the Circular, click here.

Other Publications

© DMD Advocates, 2023-24

Designed and maintained by Grapdes


This website has been designed only for the purpose of dissemination of basic information on DMD Advocates and is not meant for advertising or for soliciting work by DMD Advocates. The information provided through this website should not be construed as legal advice and is not intended to create any attorney-client relationship between DMD Advocates and the reader. Readers are requested to seek formal legal advice prior to acting upon any information provided herein.

I Agree