The market regulator has proposed doing away with stock brokers getting SEBI's no-objection certificate (NOC) for undertaking securities market related activities in Gujarat International Finance Tech-city – International Financial Services Centre (GIFT-IFSC) and has proposed that the brokers set up a separate business unit (SBU) for doing so.
Currently, brokers are required to obtain approval from the Securities and Exchange Board of India (SEBI) in the form of the NOC to float subsidiaries or to enter into joint venture to undertake securities market related activities in GIFT-IFSC.
In a consultation paper issued on March 21, SEBI said, "In order to ensure ease of doing business and to leverage the existing infrastructure of the stock brokers, it is proposed that stock brokers may offer these services under a Separate Business Unit (SBU) of the stock broking entity itself on an arms-length basis. Accordingly, the requirement for stock brokers to obtain approval (NOC) from SEBI to float subsidiary/joint venture in GIFT-IFSC may be done away with".
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The paper also proposes that those who have already got the NOC for operating their subsidiary or JV in GIFT-IFSC dismantle such subsidiary/joint venture and carry out such services under an SBU of the stock broking entity itself.
SEBI's paper proposes the following guidelines to ringfence the stock brokers' activities in the GIFT-IFSC from their activities in the Indian securities' market:
1. Stock brokers shall ensure that securities market related activities of the SBU in GIFT-IFSC are segregated and ring-fenced from the Indian securities market related activities of the stock broker and arms-length relationship between these activities are maintained
2. Such SBU in GIFT-IFSC shall be exclusively engaged in providing securities market related activities in GIFT-IFSC only.
3. Stock brokers shall prepare and maintain a separate account for the SBU on arms-length basis.
4. The net worth of the SBU shall be kept segregated from the net worth of the stock broker in the Indian securities market. Net worth criteria for stock broker shall be satisfied after excluding account of the SBU.
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