AIF Distributors And The IFSC Opportunity

Unlocking New Growth and Flexibility for AIF Distributors in the IFSC

overview

  • The International Financial Services Centres Authority (IFSCA) has introduced the Capital Market Intermediaries Regulations, 2025, marking a significant step towards transforming GIFT City into a globally competitive financial hub.
  • As the regulatory landscape shifts towards a risk-based, outcome-oriented model, stakeholders across the financial ecosystem — especially distributors — will see expanded opportunities and clearer operational frameworks.

Overview of IFSCA CMI Regulations 2025

Effective from April 11, 2025, the International Financial Services Centres Authority (IFSCA) introduced the new Capital Market Intermediaries (CMI) Regulations, superseding the earlier 2021 regulations and the 2022 distribution circular.

  • This update marks a significant shift towards a more flexible and efficient regulatory framework that prioritizes investor protection and the integrity of the securities market.
  • The new regulations provide greater operational flexibility for key players such as distributors, Fund Management Entities (FMEs), and global capital market intermediaries engaged with IFSC-based entities.
  • By streamlining registration processes and clarifying compliance requirements, the reforms aim to foster market expansion and enhance accessibility, positioning the IFSC as a competitive, investor-friendly global financial hub.

Greater Flexibility and Clear Categorization of distributor

  • Under the New CMI Regulations, a distributor is defined as any person facilitating investments in capital market products or services for a fee or commission.
  • The regulations introduce flexibility by exempting FMEs and those offering incidental investment advice from separate registration. Distributors based outside the IFSC also don’t need to register unless they set up a unit within the IFSC.
  • A clear distinction is now made between Registered and Unregistered Distributors, streamlining compliance based on operational presence.

Compliance & Conduct Requirements

  • Distributors must maintain a minimum net worth of USD 50,000 for their activities, separate from FME requirements, with compliance due by October 1, 2025.
  • All distributors are required to follow a code of conduct emphasizing integrity, transparency, and diligence, while registered distributors have additional obligations like due diligence, disclosures, and segregation of investments.
  • Both registered and unregistered distributors must appoint a Principal Officer and Compliance Officer, which can be challenging for unregistered distributors without an IFSC unit.

Opportunities & Outlook

  • The new regulations pave the way for easier market access for both Indian and global distributors, encouraging greater fund distribution through the IFSC.

The regulator’s approach clearly distinguishes responsibilities based on registration status, promoting a practical, flexible, and outcome-driven framework.

  • As GIFT City aligns with global standards, we can expect a growing and more vibrant ecosystem for IFSC-based funds and investments.

conclusion

  • The New CMI Regulations, 2025 mark a significant evolution for GIFT City, shifting towards a more risk-focused, outcome-oriented regulatory framework that aligns with global best practices.
  • By strengthening entry standards and governance, these regulations clearly differentiate obligations between Registered and Unregistered Distributors, offering greater flexibility while ensuring investor protection and market integrity.
  • Although some practical challenges remain—such as requirements for principal and compliance officers for unregistered entities—the overall approach encourages wider participation from distributors both in India and abroad.
  • This is expected to foster a vibrant ecosystem for IFSC-based funds, creating new opportunities for distributors, fund managers, and investors alike.

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