INTERNATIONAL FINANCIAL SERVICES AUTHORITY (INFORMAL GUIDANCE) SCHEME, 2024

[Mr. M. GOVINDARAJAN]

Consultation paper

In the financial services market time is of the essence considering the imminent business decisions and transactions related thereto. In order to execute any such business decisions and transactions, clarity and guidance on the associated legal and regulatory architecture also becomes paramount for taking an informed decision.  The existing financial institutions (FI) and persons intending to set up a Unit in IFSC, may encounter issues and challenges in interpreting legal frameworks associated with IFSC.  To address the same the IFSCA proposed to form a scheme in this regard.  The IFSCA issued a consultation paper on this subject and invited the suggestions from the stakeholders on or before 10.09.2024.

Scheme

Considering the suggestions/representations from the stakeholders the International Financial Services Centre Authority (IFSCA) has issued the ‘International Financial Services Centre Authority (Informal Guidance) Scheme, 2024’ (Scheme) on December 02, 2024.   This is issued in exercise of powers conferred by Section 12 and 13 of the International Financial Services Centres Authority Act, 2019.

Objective

The Scheme is aimed at providing a mechanism for seeking clarity and guidance inter-alia on various issues pertaining to a potential business activity and transactions, which are under the regulatory ambit of the IFSCA and on other legal issues emanating from the acts administered by IFSCA.

Effective date

The Scheme comes effect from 01.01.2025.

Eligibility

The following are eligible to avail this scheme-

• a person licensed, registered, recognised or authorised by the Authority;
• a person intending to undertake a business transaction in relation to financial product(s) or financial service(s) regulated by the Authority;
• a person desirous of setting up a Unit in IFSC; and
• such other person as may be specified/permitted by the Authority.

Types of guidance

The eligibility person may get guidance from IFSCA on the following two matters-

• No action letters;
• Interpretative letters.

In ‘No action letters’, if a request is made from any person the department will analyse the letter.  The Department may indicate in its guidance as to whether it may recommend or not recommend any action to the Authority under the provisions of the Act, rules, regulations, circulars, guidelines etc.

In the case of ‘interpretative letters’ the Department may provide the following-

• specific provision of the Act, Rules, Regulations, Guidelines or Circulars being administered by the Authority;
• Circulars, Guidelines or directions issued by RBI, SEBI, IRDAI and PFRDA prior to the establishment of the Authority and are presently being administered by the Authority; or
• other legal provisions of any act, Rules, Regulations, Guidelines or Circulars being administered by the Authority, in the context of a proposed activity/ business/transaction related to a financial product (s) or financial service (s) or in a specific factual situation.

Procedure

The procedure in getting the guidance in this scheme is as below-

• The Authority may specify the mode, manner and format for submission of the Application and any other matters incidental to the Scheme.
• The Application shall be filed electronically through the Single Window IT System (SWITS) of the Authority.  The application seeking Informal Guidance shall be filed through an e-mail addressed to the nodal co-ordination cell of the Authority at [email protected], until such filing of application is enabled under the Single Window IT System (SWITS);
• The application shall state as to whether the application is made for ‘no action letter’ or interpretative letter.
• The fee for filing the application is USD 1000 by way of direct credit into the following bank account of the Authority through SWIFT or any other mode as may be specified by the Authority from time to time.
• The Conformation of such payments shall be sent to the nodal co-ordination cell e-mail.
• 75% of the fee shall be charged as guidance fees and the remaining 25% will be charged as processing fees.
• The Application shall disclose and analyse all relevant and material facts and circumstances involved, along with all relevant and applicable legal provisions, in the application.
• The Application shall clearly demonstrate the link between the guidance sought/question asked and the current or proposed activity of the applicant in the IFSC, as applicable.
• The concerned Department, after the receipt of the application, may call for any other information/clarification from the applicant to obtain clarity in this application.
• The applicant shall furnish the required information to the Department within 15 days from the date of receipt of communication or at such extended time as requested by the applicant.
• If there is no response the application will liable to be rejected.
• The application shall be disposed within 30 days from the date of receipt of the application.
• The time taken for getting information from the applicant shall be excluded for this purpose.
• If the request is not in accordance with the scheme the fee paid by the applicant will be refunded after deducting the processing fee.

Effect of the guidance

The guidance issued by the Department is not appealable.  It shall not be construed as a conclusive decision of determination of any question of law or fact by the Authority.  The guidance shall not be construed as an order of the Authority.

The Authority shall not be liable for any loss or damage that the Applicant or any other person may suffer on account of the request not being answered or being belatedly answered or the Authority taking a different view from that taken in a letter already issued under this Scheme.

The guidance issued by the Department constitutes the view of the Department and shall not be binding on the Authority. However, the Authority may generally act in accordance with such letter.

Guidance obtained by fraud

If Department finds that guidance issued by it under this Scheme has been obtained by the Applicant by fraud or misrepresentation of facts, notwithstanding any legal action that the Department may take, it may declare such guidance to be non-est and thereupon the case of the Applicant will be dealt with, as if such guidance had never been rendered.

Condition

The guidance offered by the Department is conditional upon the Applicant, acting strictly in accordance with the facts and representations mentioned in the Application.

Non entertainment of request

The Department may not entertain the applications if-

• the guidance sought/query is general in nature and the application does not completely and sufficiently discloses the factual situation;
• it is based on hypothetical situations;
• the applicant has no direct or proximate interest;
• the applicable legal provisions are not cited;
• the same matter has already been disposed by the Department;
• the investigation, inquiry or enforcement action has already been initiated in the said case;
• if the matter is sub judice before any Court/Tribunal;
• if the request is related to policy matters;
• in such other cases as the Department deems fit.

Reference:

1. https://ifsca.gov.in/Document/ReportandPublication/consultation-paper-on-the-ifsca-informal-guidance-scheme-202420082024050955.pdf.