OVERVIEW:

• The International Financial Services Centres Authority (IFSCA) has issued a consultation paper on proposed International Financial Services Centres Authority (Informal Guidance) Scheme, 2024.

• This scheme is designed to help financial institutions and individuals operating or planning to operate within an International Financial Services Centre (IFSC) by offering informal guidance on legal and regulatory matters.

• Given the newness of the IFSC framework in India, the scheme aims to address challenges in interpreting relevant laws and regulations.

WHO CAN APPLY?

• The following can make a request for informal guidance, addressed to the concerned Department under the Scheme:

       (i) Any entity that is already licensed, registered, recognized, or authorized by the IFSCA.

 

      (ii) Individuals or entities intending to undertake business activities or transactions within the IFSC. This is particularly                     useful for those who are considering setting up a unit within the IFSC and need clarity on legal and regulatory                             requirements before proceeding.

 

     (iii) The scheme also allows for other entities or persons, as may be specified by the IFSCA, to seek guidance under this                   scheme.

TYPES OF GUIDANCE:

• No-Action Letters:

         -No Action Letters indicate whether the IFSCA would or would not recommend any regulatory or enforcement action if               a proposed activity or transaction is carried out.

        -These are Useful for entities that need assurance before proceeding with specific actions or transactions that may                   be subject to regulation by the IFSCA. 

• Interpretive Letters:

       -Interpretive Letters provide an interpretation of specific legal provisions, circulars, or regulations administered by the                IFSCA.

      -These are beneficial for entities that need clarification on the applicability of certain laws or regulations to their                           business activities.

      -This can include interpretations of existing circulars issued by other regulatory bodies like RBI, SEBI, IRDAI, and PFRDA,                  which are now under IFSCA’s purview in the IFSC context.

PROCESS AND FEES:

• The entity must submit a detailed request that clearly describes the factual situation, the proposed business activity or transaction, and the applicable legal provisions.

• The request must be accompanied by a fee of USD 1,000.

• This fee is split into two parts:

       – Processing Fee: 25% of the total fee, which covers the administrative costs of processing the request.

       – Guidance Fee: The remaining 75%, which is for the issuance of either a No-Action Letter or an Interpretive Letter.

CONFIDENTIALITY:

• Entities can request that their guidance requests be treated confidentially for a specified period, not exceeding 90 days from the date of the IFSCA’s response.

• During this period, the IFSCA will ensure that the details of the request and the response are kept confidential, providing the requestor with the privacy needed to plan their business activities without public disclosure.

LIMITATIONS:

• The guidance provided is non-binding and does not constitute a conclusive legal determination. The IFSCA reserves the right to take a different view if necessary.

• The IFSCA may decline to provide guidance on certain requests, including those that are hypothetical, incomplete, or related to pending legal matters.

BENEFITS OF THE SCHEME:

• Clarity in Decision-Making: Entities can make more informed decisions by obtaining clear guidance on the regulatory implications of their proposed actions, reducing the risk of non-compliance.

• Cost-Effective: For a relatively modest fee, entities can access expert regulatory advice that could prevent costly legal issues in the future.

• Speed and Efficiency: The scheme’s 30-day response time ensures that entities can receive the guidance they need in a timely manner, allowing them to act quickly in a dynamic business environment.

• Confidentiality: The option to keep requests confidential provides a safeguard for entities that are in the early stages of planning or executing sensitive business activities.

CONCLUSION:

• This scheme is an important step by the IFSCA to create a supportive and transparent regulatory environment within the IFSC, encouraging more businesses to establish and expand their operations in this emerging global financial hub.

• As the IFSC continues to develop, the Informal Guidance Scheme could evolve further, potentially expanding its scope and refining its processes based on feedback from the industry.