Comments received regarding the Consultation Paper on Master Circular for Broker Dealers and Clearing Members

Public comments on draft Master Circular for Broker Dealers and Clearing Members Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. 1 1.6 Further, the SWIT System also enables Format regarding intimation of The format regarding the online payment of fees in USD for payment made may be available intimation of payment is entities desirous of setting up operations on SWITS portal itself. already available in IFSCA in IFSC. circular, however, the same may be available on SWITS for better operational feasibility. 2 6.4 The Stock Exchange shall report all The Stock Exchange may submit The Exchange will be able to major non-compliances / observations the findings of particular quarter review and submit the report of system auditors, broker wise, on a in which the report received from post receipt of the same from quarterly basis to IFSCA. the Broker Dealer in next quarter. Broker dealer. For e.g. Report submitted in quarter and HY ended, the findings of the same may be intimated to IFSCA by the Exchange in the quarter ending September. 3 13.2.1 (ii) The Stock Exchanges shall mandate a IFSCA may mandate the For better compliance minimum time period for such testing in participation of broker dealers in perspective. the mock trading sessions. monthly mock activity. 4 13.2.3 The Stock Exchanges shall monitor the Revised Clause: The Stock It will be helpful, considering compliance of Broker Dealers, who use Exchanges shall monitor the the ease of doing business trading algorithms, with regard to the compliance of Broker Dealers, perspective. requirement of participation in mock who use trading algorithms, with trading session as mandated herein. In regard to the requirement of those cases where the Stock Exchanges participation in mock trading find that the Broker Dealer has failed to session as mandated herein. In participate in such mock trading those cases where the Stock sessions, the Stock Exchange shall call Exchanges find that the Broker for reasons and if found unsatisfactory, Dealer has failed to participate in shall suspend the proprietary trading such mock trading sessions, the Page 1 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. rights of the Broker Dealer for a Stock Exchange shall call for minimum period of one trading day. reasons and if found unsatisfactory, the Stock Exchange may take necessary action against the broker dealer. 5 13.2.4 The Stock Exchanges shall also ensure Revised Clause: The Stock It will be helpful, considering that the system auditors examine the Exchanges shall also ensure that the ease of doing business compliance of Broker Dealer, who use the system auditors examine the perspective. trading algorithms, with regard to the compliance of Broker Dealer, who requirement of participation in mock use trading algorithms, with trading session, as mandated herein, and regard to the requirement of provide suitable comments in the participation in mock trading periodic system audit report. In cases session, as mandated herein, and where the system audit report indicate provide suitable comments in the that the Broker Dealer has failed to periodic system audit report. In participate in such mock trading cases where the system audit sessions, Stock Exchange shall call for report indicate that the Broker reasons from the Broker Dealer and if Dealer has failed to participate in found unsatisfactory, shall suspend the such mock trading sessions, Stock proprietary trading rights of the Broker Exchange shall call for reasons Dealer for a minimum period of one from the Broker Dealer and if trading day. found unsatisfactory, the Stock Exchange may take necessary action against the broker dealer. 6 17.6.1 Proactively and independently It is suggested not to implement Currently less numbers of monitoring technical glitches shall be API based Logging and Monitoring brokers participation is there one of the approaches in mitigating the Mechanism (LAMA) at this for trading activities and also impact of such glitches. In this context, juncture. new the Stock Exchange shall build API based development/Infrastructure Logging and Monitoring Mechanism will be required for (LAMA) to be operated between the implementation of the LAMA. Stock Exchanges and specified Broker Considering above, it is Page 2 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. Dealers' trading systems. Under this suggested not to implement mechanism, specified Broker Dealers API based LAMA at this shall monitor key systems & functional juncture. parameters to ensure that their trading systems function in a smooth manner. The Stock Exchanges shall, through the API gateway, independently monitor these key parameters to gauge the health of the trading systems of the specified Broker Dealers. 7 17.6.3 The Stock Exchanges shall maintain a Revised Clause: The Stock - dedicated cell for monitoring the key Exchanges shall have necessary parameters and the technical glitches arrangement in place for occurring in the Broker Dealers' trading monitoring the key parameters systems. The cell also shall intimate the and the technical glitches specified Broker Dealer concerned occurring in the Broker Dealers' immediately about the breach of the key trading systems. The parameters monitored under LAMA. team/manpower involved also shall intimate the specified Broker Dealer concerned immediately about the breach of the key parameters monitored under LAMA. 8 22.1 In terms of regulation 25 of the CMI Format of Annual Compliance It will be helpful for prompt Regulations, the Broker Dealer or Audit Report may be prescribed and better compliance Clearing Member shall have an annual by IFSCA. perspective. audit conducted in respect of compliance with the CMI Regulations by a member of the Institute of Chartered Accountants of India or a member of the Institute of Company Secretaries of India or a member of the Institute of Cost Page 3 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. Accountants of India or any person authorised to conduct audit in a Foreign Jurisdiction. 9 IFSCA/CM Ease of doing business Given GIFT IFSC's status as an Currently, both GIFT IFSC DDMIIT/SO emerging international financial exchanges offer a limited range F /2023- jurisdiction, we propose of contracts with 24/001 introducing a framework whereby comparatively lower trading members holding memberships volumes than domestic Indian on both GIFT IFSC exchanges exchanges, which have would be subject to only half of the significant depth and liquidity Base Minimum Capital (BMC) across multiple contracts of requirement on each exchange. various products. Retail client This measure would enable participation on GIFT IFSC members to offer contracts from exchanges remains minimal, both exchanges to their clients, and the Base Minimum Capital thereby enhancing market access (BMC) requirement adds an and contributing to greater additional cost burden for liquidity in GIFT IFSC-traded members. Due to the lack of contracts. liquidity, broker dealers are hesitant to take membership on both exchanges, resulting in over 20 members opting for only one exchange membership. 10 11.2 Annexure-5 Since the Broker Dealers at IFSC NA Clause 8. b) While conducting the are allowed to appoint APs inspection of the Broker Dealer, the outside GIFT (India & Abroad), the stock exchange shall also conduct Exchange inspection would entail inspection of branches (where the significant cost and have to be terminals of the Authorized Persons priced in. Accordingly, Exchange (AP) are located) and records of the should be allowed to recover the operations carried out by them inspection cost. Page 4 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. 11 13.2.1.b.iv ii. The test environment shall be made This may have to be suitably Since the Exchange operates available for at least two hours after modified as the IFSC Exchanges for approximately 21 hours market hours and at least on two trading run market at extended hours and daily, maintaining a test days in a week. there is hardly a downtime. environment exclusively after- Therefore, a parallel test market hours may not be environment is feasible solution viable. which is already in place at Exchange. 12 13.2.5 For pre-approval / periodic system audit It is suggested that the terms The terms CTCL and IML may of Computer-to-Computer Link (CTCL) CTCL, IML may be replaced with not be relevant now. or Intermediate Messaging Layer (IML), API. IBT, DMA, STWT, SOR and AT, Broker Dealers shall engage a system auditor with any of the certifications specified by the IFSCA. While finalizing the system auditor, Broker Dealers shall ensure the system auditor does not have any conflict of interest with the Broker Dealer and the directors / promoters of the system auditor are not directly or indirectly related to the current directors or promoters of Broker Dealer. 13 21.1 The Broker Dealer or Clearing Member Additionally, it is suggested that In order to enhance ease of shall submit reports to the IFSCA on a following submission can be part doing business and to maintain quarterly basis in accordance with the of quarterly reporting and should uniformity in submission. requirements specified under the be mandatorily submitted to the circular titled "Reporting Norms for Stock Exchange, being the front- Capital Market Intermediaries" dated line regulator for the Broker February 08, 2024 (as amended from Dealers, then Stock Exchange shall time to time). in -turn forward the said submission to IFSCA: Page 5 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. 1. Networth Submission as follows: (ref: 4.3.1.A.a) Quarterly: Unaudited net worth which shall be self-certified by the Compliance Officer and the Principal Officer, on the letterhead of the entity and can be made part quarterly reporting as specified by IFSCA through its circular "F. No. 1/IFSCA/CMI Supervision/2023- 24" dated February 08, 2024. Annual: Audited net worth certificate can be submitted along with Annual compliance audit in terms of Regulation 25 of IFSCA (Capital Market Intermediaries) Regulations, 2025. 2. Report of new accounts Opened:(ref: 4.3.1.A.f) The report on accounts opened during the quarter can be made part quarterly reporting as specified by IFSCA through its circular "F. No. 1/IFSCA/CMI Supervision/2023-24" dated February 08, 2024. 14 22.1 In terms of regulation 25 of the CMI It is suggested that said In order to enhance ease of Regulations, the Broker Dealer or submissions should be doing business and to maintain Clearing Member shall have an annual mandatorily submitted to the uniformity in submission. audit conducted in respect of compliance Stock Exchange, being the front- with the CMI Regulations by a member of line regulator for the Broker the Institute of Chartered Accountants of Dealers, then Stock Exchange shall Page 6 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. India or a member of the Institute of in-turn forward the said Company Secretaries of India or a submission to IFSCA. member of the Institute of Cost Additionally, Regulation 25 (2) of Accountants of India or any person the CMI Regulations currently authorised to conduct audit in a Foreign does not provide any format for Jurisdiction. submitting Annual Compliance Audit. Accordingly, a draft model is attached for reference. (ref: 4.3.1.A.b) 15 3.1 The certificate of registration granted to Addition: The requirement of a Broker Dealer or Clearing Member Provided that where a Broker- commencement within three shall be perpetual, unless it is suspended Dealer or Clearing Member has months and consequential or cancelled by the Authority. been granted a fresh certificate of deemed revocation upon registration by the IFSCA such inactivity is a necessary Broker-Dealer or Clearing regulatory safeguard, ensuring: Member shall commence - Optimal utilization of IFSC operations with the relevant Stock market infrastructure Exchange or Clearing Corporation, - Reduction of avoidable as applicable, within three (3) administrative and overhead months from the date of costs registration. In the event that the - Promotion of market Broker-Dealer or Clearing discipline and regulatory Member remains inactive for a efficiency continuous period exceeding - Prevention of indefinitely three (3) months following the dormant intermediary status date of registration, the - Alignment with the regulatory registration granted to such intent of licensing Broker-Dealer or Clearing Member shall be deemed to have been revoked, without prejudice to any action that the IFSCA may Page 7 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. take under applicable laws and regulations. Provided further that where a Broker Dealer or Clearing Member who already holds registration by IFSCA and failed to commence trading activities with any Stock Exchange or Clearing Corporation, as the case may be, in the IFSC on or before March 31, 2026, the registration of Broker Dealer or Clearing Member, as the case may be, deemed to have had its registration revoked, without prejudice to any action that the IFSCA may take under the applicable laws and regulations. 16 3.1 The certificate of registration granted to Addition: The requirement of a Broker Dealer or Clearing Member Provided that where a Broker- commencement within three shall be perpetual, unless it is suspended Dealer or Clearing Member has months and consequential or cancelled by the Authority. been granted a fresh certificate of deemed revocation upon registration by the IFSCA such inactivity is a necessary Broker-Dealer or Clearing regulatory safeguard, ensuring: Member shall commence • Optimal utilization of IFSC operations with the relevant Stock market infrastructure Exchange or Clearing Corporation, • Reduction of avoidable as applicable, within three (3) administrative and overhead months from the date of costs registration. In the event that the • Promotion of market Broker-Dealer or Clearing discipline and regulatory Member remains inactive for a efficiency continuous period exceeding three (3) months following the Page 8 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. date of registration, the • Prevention of indefinitely registration granted to such dormant intermediary status Broker-Dealer or Clearing • Alignment with the Member shall be deemed to have regulatory intent of licensing been revoked, without prejudice to any action that the IFSCA may take under applicable laws and regulations. 17 4.1.2 The Stock Exchange and the Clearing The Stock Exchange and the Since Clearing Members are Corporation shall conduct inspection of Clearing Corporation shall members of Clearing their members in terms of the above conduct inspection of their Corporation, it is suggested policy and in case of members who hold members in terms of the above that the Clearing Corporations multiple memberships of the exchanges, policy and in case of members are added. the Stock Exchanges shall establish an who hold multiple memberships information sharing mechanism with of the exchanges/Clearing one another on the important outcome Corporations, the Stock of inspection in order to improve the Exchanges/Clearing Corporations effectiveness of supervision. shall establish an information sharing mechanism with one another on the important outcome of inspection in order to improve the effectiveness of supervision. 18 4.1.5 The clearing activity undertaken by a The clearing activity undertaken It is suggested that for the Broker Dealer for other Broker Dealers by Clearing Members for other brokers dealers clearing trades shall be inspected by the Clearing Broker Dealers shall be inspected for other broker dealers can be Corporation. Other activities of Broker by the Clearing Corporation. Other termed clearing members. Dealers shall be inspected by Stock activities of Broker Dealers shall Exchanges. If the Stock Exchanges and be inspected by Stock Exchanges. Clearing Corporations so desire, they If the Stock Exchanges and may conduct joint inspections of Broker Clearing Corporations so desire, Dealers. they may conduct joint Page 9 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. inspections of Broker Dealer / Clearing Members. 19 4.1.8 The Stock Exchanges shall establish an The Stock Exchanges / Clearing Since Clearing Members are information sharing mechanism with Corporations shall establish an members of Clearing one another on the important outcome information sharing mechanism Corporation, it is suggested of inspection of members who hold with one another on the important that the Clearing Corporations multiple memberships of the exchanges outcome of inspection of members are added. in order to improve the effectiveness of who hold multiple memberships supervision and shall also bring cases of of the exchanges in order to repetitive and / or serious violations to improve the effectiveness of the notice of IFSCA. supervision and shall also bring cases of repetitive and / or serious violations to the notice of IFSCA. 20 4.3.1 Stock Exchanges and Clearing Members Stock Exchanges and Clearing Clearing Members may be shall frame various event-based Corporations shall frame various replaced with Clearing monitoring criteria based on market event-based monitoring criteria Corporations dynamics and market intelligence for based on market dynamics and monitoring of Broker Dealers. An market intelligence for illustrative list of such monitoring monitoring of Broker Dealers. An criteria are given below: illustrative list of such monitoring criteria are given below: 21 21.1 The Broker Dealer or Clearing Member Additionally, it is suggested that In order to enhance ease of shall submit reports to the IFSCA on a following submission can be part doing business and to maintain quarterly basis in accordance with the of quarterly reporting and should uniformity in submission. requirements specified under the be mandatorily submitted to the circular titled "Reporting Norms for Stock Exchange and Clearing Capital Market Intermediaries" dated Corporation, being the front-line February 08, 2024 (as amended from regulator for the Broker Dealers time to time). and Clearing Members, respectively, then Stock Exchange and Clearing Corporation shall in- Page 10 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. turn forward the said submission to IFSCA: 1. Networth Submission as follows: (ref: 4.3.1.A.a) Quarterly: Unaudited net worth which shall be self-certified by the Compliance Officer and the Principal Officer, on the letterhead of the entity and can be made part quarterly reporting as specified by IFSCA through its circular "F. No. 1/IFSCA/CMI Supervision/2023- 24" dated February 08, 2024. Annual: Audited net worth certificate can be submitted along with Annual compliance audit in terms of Regulation 25 of IFSCA (Capital Market Intermediaries) Regulations, 2025. 22 22.1 In terms of regulation 25 of the CMI It is suggested that said In order to enhance ease of Regulations, the Broker Dealer or submissions should be doing business and to maintain Clearing Member shall have an annual mandatorily submitted to the uniformity in submission. audit conducted in respect of compliance Stock Exchange and Clearing with the CMI Regulations by a member of Corporations, being the front-line the Institute of Chartered Accountants of regulator for the Broker Dealers India or a member of the Institute of and Clearing Members, then Stock Company Secretaries of India or a Exchange and Clearing member of the Institute of Cost Corporation shall in-turn forward Accountants of India or any person the said submission to IFSCA. authorised to conduct audit in a Foreign Additionally, we request for a Jurisdiction. format for submission of such Annual Compliance Audit Report. Page 11 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. 23 22.3 It is also clarified that Broker Dealers It is also clarified that Broker Since Clearing Members are shall also submit a copy of such audit Dealers or Clearing Member shall also required to carry out report to the Stock Exchanges. The Stock also submit a copy of such audit annual compliance audit, it is Exchanges shall be required to submit a report to the Stock Exchanges / suggested that the same may be summary of audit findings along with its Clearing Corporation. The Stock submitted to the Clearing recommendations to IFSCA by 30th of Exchanges / Clearing Corporation Corporation. November of every year. shall be required to submit a summary of audit findings along with its recommendations to IFSCA by 30th of November of every year. 24 24 Refund of security deposit to Broker Addition: For ease of understanding, it is Dealers on surrender of membership Refund of security deposit to suggested to specify timelines 24.1. On approval of application for Clearing Members on surrender of for refund of security deposit to surrender of Broker Dealer's membership Clearing Members on registration by IFSCA, the Stock a) IFSD shall be refunded after surrender of membership. Exchange shall release Security Deposit twelve months from the date of of the Broker Dealer (engaged in trading approval of surrender application on behalf of clients) after twelve months by IFSCA or the respective from the date of approval of surrender committee (as applicable), if application by IFSCA. member is clearing trades on 24.2. On approval of application for behalf of BD/RTP/CP/SNA. surrender of Broker Dealer's b) IFSD shall be refunded after six registration by IFSCA, the Exchange shall months from the date of approval release Security Deposit of the Broker of surrender application by IFSCA Dealer (engaged only in proprietary or the respective committee (as trading for the last three years prior to applicable), if member is engaged the date of application of surrender) only in self-clearing for the last after six months from the date of three years prior to the date of approval of surrender application by application of surrender IFSCA. Page 12 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. 25 7. Early 7.1 It has been decided to put in place an The threshold should include the US Securities and Exchange Warning Early Warning Mechanism and sharing following but not limited to: Commission (SEC) Rule 17a-11 Mechanism of information between Stock • Deterioration in broker net establishes a formal early to Prevent Exchanges, Depositories and Clearing worth, delayed financial warning reporting system for Diversion Corporations to detect the diversion of reporting. broker-dealers in the United of Client client's securities by the Broker Dealer at • Significant trading exposure, States. The rule requires Securities an early stage so as to take appropriate related-party lending. broker-dealers to immediately (page no. preventive measures. The threshold for • Sudden activity in dormant notify the regulator when 16 of the such early warning signals shall be certain signs of financial stress, client accounts master decided by the Stock Exchanges, operational weakness, or • Invocation of pledges, large asset circular) Depositories and Clearing Corporations regulatory breaches occur. It is transfers across proprietary with mutual consultation. one of the strongest examples accounts. globally of a structured early- These red flags should be shared warning framework for in real time to enable early intermediaries. intervention or within such time Broker-dealers must notify the period as may be decided by the SEC and their designated authority. examining authority same day or within 24 hours when any of the following occurs: a) Capital Deficiency b) Large Exposure/Leverage Risk c) Operational Failures d) Control Weakness e) Backlisting failures f) Customer/client protection issue g) Notification Failures This U.S. rule demonstrates a global benchmark for early warning systems where Page 13 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. regulated intermediaries must proactively report pre-breach financial and operational red flags. 26 22. Annual 22.1. In terms of regulation 25 of the CMI The said clause 22.1 stipulates To remove this discrepancy Compliance Regulations, the Broker Dealer or that an annual audit shall be and ensure regulatory clarity, Audit (page Clearing Member shall have an annual conducted by a member of the we recommended that the term no. 37) audit conducted in respect of compliance Institute of Chartered "a member" be replaced with "a with the CMI Regulations by a member of Accountants of India, or a member practising professional" in the Institute of Chartered Accountants of of the Institute of Company respect of each institute India or a member of the Institute of Secretaries of India, or a member mentioned. Company Secretaries of India or a of the Institute of Cost member of the Institute of Cost Accountants of India, or any Accountants of India or any person person authorised to conduct authorised to conduct audit in a Foreign audit in a foreign jurisdiction. Jurisdiction. However, the term "member" of these professional institutes includes both practising professionals as well as members in employment (working professionals). Members who are in full-time employment are not legally authorised to undertake audits or certify compliance on behalf of regulated entities. Allowing "any member" therefore creates an inconsistency and may inadvertently permit individuals who are not authorised to conduct audits to undertake such statutory assignments, leading to potential Page 14 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. regulatory and legal non- compliance. 27 6.1.3 The Broker Dealers shall select auditors Such an auditor shall be eligible It is suggested to include a as per the selection norms provided in for re-appointment after a cooling-off period for the the guidelines and directions issued by cooling-off period of one year. Auditor or Audit firm after Stock Exchanges and IFSCA from time to consecutive audits to avoid time. The Auditor may perform an audit ambiguity. of the Broker Dealer for a maximum period of three years. 28 15.2 The Broker Dealer or Clearing Member An auditor or audit firm may Auditor Selection Norms for shall comply with the guidelines perform an audit of the Broker Cyber Security Audit are specified under the circular titled Dealer for a maximum period of suggested in line with System 'Guidelines on Cyber Security and Cyber three years. Such an auditor shall Auditor conduction norms Resilience for Regulated Entities in be eligible for re-appointment 6.1.3. IFSCs' dated March 10, 2025. after a cooling-off period of one It is suggested to have the year. cooling-off period added for the Auditor or Audit form after the consecutive audits. Extending these norms to Cyber Security Audits ensures consistency across regulatory frameworks and avoids ambiguity. 29 17.2 A 'Technical Glitch' shall mean any A "Technical Glitch" shall mean The existing definition of failure, interruption or malfunction, any a systemic and material 'Technical Glitch' is too broad howsoever caused, affecting the Broker- failure, interruption or and would result in over Dealer's operational infrastructure. This malfunction, howsoever caused, reporting to the Stock includes, but not limited to: defects or affecting the Broker-Dealer's Exchanges, which leads to errors in hardware, software, network operational infrastructure and lower quality of supervision connectivity, automated processes, and that results the inability of the over serious technical glitches. any electronic products, platforms, or Broker Dealer's customers to Suggest that the definition services delivered by the Broker-Dealer. access the market for more than 1 incorporates materiality Page 15 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. hour during market opening thresholds, which directly hours. This includes, but not relate to the technical glitch limited to: defects or errors in causing inability of the Broker hardware, software, network Dealer's customers to access connectivity, automated the market. This would focus processes, and any electronic the Stock Exchanges' products, platforms, or services supervision on material delivered by the Broker-Dealer. technical glitches that have an impact on trading. 30 17.3.5 The Broker Dealers shall submit The Broker Dealers shall submit This is to clarify that reports information stated in para 17.3.1, 17.3.2 information stated in para 17.3.1, need only be sent to relevant and 17.3.3 above, to all The Stock 17.3.2 and 17.3.3 above, to all The Stock Exchanges and not all Exchanges. Stock Exchanges in which the Stock Exchanges. Broker Dealer is a member. 31 18 Internal Policy on Outsourcing We suggest that this clause is Intragroup arrangements are clarified to add a definition of common among international "outsourcing" as not including participants. Given that the intra-group arrangements, e.g. services are all provided by central services being provided by entities within the same group, corporate entities within the same being subject to the same group. management and governance frameworks, these should not be considered "outsourcing" in the usual sense. 32 22.1 In terms of regulation 25 of the CMI Auditor Selection Norms for Half-yearly internal audits Regulations, the Broker Dealer or Annual Compliance Audit: under the Exchange are now Clearing Member shall have an annual No Broker dealer shall appoint or being replaced by IFSCA's audit conducted in respect of compliance reappoint annual compliance audit with the CMI Regulations by a member of a) an individual as internal auditor requirement. Suggested norms the Institute of Chartered Accountants of for more than one term of five align with SEBI Circular India or a member of the Institute of consecutive years; and SEBI/HO/MIRSD/MIRSD2/CIR Company Secretaries of India or a /P/2016/95 dated September Page 16 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. member of the Institute of Cost b) an audit firm as internal auditor 26, 2016 (Clause 4.2.1.2 to Accountants of India or any person for more than two terms of five 4.2.1.4) which prescribes authorised to conduct audit in a Foreign consecutive years. tenure limits for internal Jurisdiction. An individual internal auditor auditors of stockbrokers. These who has completed his term norms will provide clarity under clause (a) above shall not be during auditor appointments. eligible for re-appointment as internal auditor for the same broker dealer for five years from the completion of his term. An audit firm which has completed its term under clause (b) above, shall not be eligible for re-appointment as internal auditor for the same broker dealer for five years from the completion of such term. 33 Not part of Regulation 9(8) of CMI Regulations: We suggest that one individual The CMI Regulations the Master Where an entity has multiple should be permitted to act as established a unified Circular for registrations under these regulations, Principal Officer ("PO") for all supervisory framework for Broker the principal officer shall be activities governed by the CMI Capital Market Intermediaries Dealers and appointed/designated for each such Regulations. including Broker Dealers and Clearing registration separately: Provided that an While the CMI Regulations already Clearing Members in IFSC. The Members entity with registration as broker dealer, permit an entity to appoint a compliance requirements ("Master clearing member and depository single individual as the arising from CMI Regulations Circular"). participant may have the same person as Compliance Officer ("CO") for all directly impact entities Comment principal officer for these activities: activities under the CMI governed by the Master pertains to Provided further that an entity with Regulations, we propose that the Circular i.e. Broker Dealers and the registration as credit rating agency and flexibility may be provided to Clearing Members in IFSC. Regulation ERDPP may have the same person as allow the same individual to act as Therefore, comments on 9(8) and principal officer for these activities. CO under both the CMI Regulation 9(8) and Regulation 9(9) of the Regulations and the IFSCA (Fund 9(9) of the CMI Regulations are IFSCA relevant to ensure consistency Page 17 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. (Capital Regulation 9(9) of CMI Regulations: Management) Regulations, 2025 and compliance for Broker Market Where an entity has multiple ("FM Regulations") for entities Dealers and Clearing Members Intermedia registrations under these regulations, registered under both the in IFSC. ries) the entity may have the same person as frameworks. Rationale for the suggestions: Regulations compliance officer for ensuring Similarly, flexibility may be - IFSC entities may undertake , 2025 compliances with all the applicable provided to allow the same multiple regulated activities ("CMI regulatory and legal requirements for its individual to act as Principal within the same legal entity, Regulations activities as capital market intermediary Officer under both the CMI and such activities may be "). in the IFSC. Provided further that the Regulations and the FM supported by common Authority may review sub-regulations Regulations for entities registered governance and control (8) and (9) based on the size, scale and under both the Regulations. frameworks. In such cases, complexity of business activities of the appointing separate PO and a intermediaries and may specify revised separate CO for different norms in this regard. regulated activities under CMI Regulations and FM Regulations could lead to additional administrative layers, without offering a material improvement in oversight. Allowing a single PO and single CO to oversee all activities under both the regulatory framework would enable more coherent supervision and support integrated risk management across the entity. - The CMI Regulations provide flexibility by allowing a common PO for certain regulated activities such as Broker Dealer, Clearing Member and Depository Page 18 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. Participant. Further, the IFSCA Board has approved the appointment of the same PO for custodian and for distribution activities along with a separate vertical head for distribution in its meeting dated December 22, 2025. Similarly, the CMI Regulations permit the appointment of a common Compliance Officer (CO) for all regulated activities under the CMI Regulations. Extending this principle more broadly to permit a single individual to serve as PO and similarly allowing a single individual to serve as CO across both regulatory frameworks would help address challenges in sourcing senior key personnel and would support ease of doing business for entities operating in the IFSC. - A single PO and single CO with appropriate seniority and oversight can effectively discharge responsibilities across all regulated activities. Permitting a single individual to act as PO and single individual to act as CO for all activities governed by the CMI Page 19 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. Regulations and extending this flexibility to allow the single individual to act as PO and single individual to act CO under both the CMI Regulations and FM Regulations would alleviate challenges in hiring key personnel. This is beneficial particularly in developing financial ecosystem. 34 Clause 19.2 The Broker Dealer or Clearing Member It is suggested that a single Typically, Compliance Officer of shall comply with the applicable norms individual may be permitted to act the entity acts as Complaint and requirements relating to handling of as Complaint Redressal Officer Redressal Officer and Principal consumer complaints specified by the and a single individual may be Officer acts as Compliant Authority by way of circular titled permitted to act as Compliant Redressal Appellate Officer for "Complaint Handling and Grievance Redressal Appellate Officer for all the regulated entities in GIFT Redressal by Regulated Entities in the activities governed under both the IFSC. In line with our IFSC" dated December 02, 2024 read CMI Regulations and the FM suggestion in 1 & 2 above, we with circular titled "Extension of Regulations for entities registered request that the single timeline for implementation of the under both the Regulations. individual may be permitted to Circular titled "Complaint Handling and serve as Complaint Redressal Grievance Redressal by Regulated Officer and single individual Entities in the IFSC" dated December 02, may be permitted to act as 2024" issued on January 13, 2025. Compliant Redressal Appellate Officer for all activities governed under both the CMI Regulations and the FM Regulations for entities registered under both the Regulations. Page 20 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. 35 13.2.1(a) The Stock Exchanges shall provide It is respectfully submitted that In practice, the parent suitable facilities to market participants the provision of a TEST / UAT / exchange provides TEST / UAT / software vendors to test new software Simulation environment, accessed / Simulation environments or existing software that have through the same production (such as NEAT Test, CTCL Test, undergone change. Subjecting the new leased line, with appropriate etc.) which are accessible using software or existing software that have logical segregation, access the same leased line as undergone change to such testing facility controls, and monitoring production, with segregation shall be mandatory for market mechanisms, may be considered achieved through different IPs, participants, before putting it in use. adequate for meeting the ports and logical controls at the prescribed technology, system parent exchange's end. The security, and connectivity parent exchange does not requirements. In this regard, the mandate a separate leased line requirement to maintain a solely for testing purposes. separate leased line exclusively Members demonstrate for testing purposes may not be compliance through logical mandated, provided that segregation, access controls, sufficient safeguards are change management implemented to ensure isolation procedures and audit logs, from the production environment. which is also considered Such an arrangement would be sufficient from a system audit consistent with the objective of and CTCL compliance ensuring robust system controls, perspective. While a separate operational resilience, and leased line may be adopted regulatory compliance, while also voluntarily based on internal IT enabling efficient utilisation of or risk policies, making it infrastructure and cost mandatory may increase costs optimisation, without without proportionate compromising system integrity, regulatory benefit. Hence, data confidentiality, or clarification would align the supervisory oversight. framework with prevailing parent exchange practices, while continuing to ensure Page 21 of 22Sr. Para / Text of the Clause Comments / Suggestions Detailed Rationale No. Clause No. robust testing and risk management. IFSCA Response: During the public consultation, comments were received from various stakeholders. The comments / suggestions received were examined and the draft master circular for Broker Dealers and Clearing Members was suitably modified. Page 22 of 22