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CS Professional · Strategic Management and Corporate Finance

Listing and Issuance of Securities in an International Financial Services Centre

An International Financial Services Centre (IFSC) is a centre set up under section 18 of the SEZ Act, 2005, such as GIFT City. The IFSCA Act, 2019 creates one Authority to regulate financial products, services and institutions there. Under section 20, financial services transactions are in the foreign currency specified by regulations.

What this chapter covers

This chapter explains how securities are listed and issued in an International Financial Services Centre, such as the one at GIFT City. It starts with what an IFSC is, then moves to the law that governs it: the International Financial Services Centres Authority Act, 2019. You learn who the Authority is, what it regulates, and how other Indian laws can be adapted for IFSCs.

The second half applies this framework to capital raising. You study listing of securities on international exchanges in an IFSC, and issuance of debt and equity there. The Act sets the structure. The Authority's regulations set the detailed listing and issuance conditions, so read the framework first and then the specific rules.

The chapter connects to the Corporate Finance part of Strategic Management and Corporate Finance. There you study sources of finance, raising capital and the cost of capital. Here you see an alternative route: raising funds in foreign currency through an IFSC instead of the domestic market. Expect case-based questions that ask which regulator applies and what an Indian company can do.

Corporate Finance carries 60 of the 100 marks in the Strategic Management and Corporate Finance paper. This chapter gives you a capital-raising route outside the domestic market, and it is mostly theory and law.

The Act is short and its definitions are precise, so a well-prepared student can write accurate, structured answers. Questions may test whether a product is a financial product, whether a unit is a financial institution, or which regulator exercises power. Once you know the framework, these questions are quick marks.

An Overview on Listing and Issuance of Securities in International Financial Services Centre: topics in the order to study them

  1. 1Overview of International Financial Services CentreStart here to understand what an IFSC is, its SEZ Act basis and why it works in foreign currency.
  2. 2IFSCA Act, 2019: Authority and FrameworkNext learn the Authority, its functions, the key definitions and its powers, since everything else rests on them.
  3. 3Power to Modify Other Enactments for IFSCsStudy section 31 after the framework, because it explains how other Central Acts are adapted for IFSCs.
  4. 4Listing of Securities on International Exchanges in IFSCWith the legal base clear, move to how securities get listed on exchanges in an IFSC.
  5. 5Issuance of Securities in IFSC: Debt and EquityFinish with issuance, which builds on listing and ties back to the paper's corporate finance topics.

How to prepare An Overview on Listing and Issuance of Securities in International Financial Services Centre

Treat this as a law-plus-application chapter. Learn the Act's wording first, then practise using it on facts.

  1. Read the definition of IFSC in section 3(1)(g) and note it is a centre set up under section 18 of the Special Economic Zones Act, 2005.
  2. Memorise the definitions of financial product, financial service and financial institution in section 3(1). Write the list of financial products in your own words: five specified heads (securities; contracts of insurance; deposits; credit arrangements; and foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately) plus a residual head for any other product or instrument notified by the Central Government.
  3. Learn the Authority's status under section 4: a body corporate with perpetual succession and a common seal that can sue and be sued.
  4. Learn section 12 (functions), section 13 (powers of existing regulators exercised by the Authority) and section 20 (transactions of financial services in an IFSC are in the foreign currency specified by regulations).
  5. Understand section 31: the Central Government can by notification direct that provisions of other Central Acts (and rules, regulations, notifications or orders under them) do not apply to financial products, financial services or financial institutions in an IFSC, or apply with specified exceptions, modifications and adaptations. A draft is laid before each House for a total of thirty days, in one session or across successive sessions. If both Houses agree to disapprove or modify it, the notification is not issued, or is issued only in the modified form.
  6. Study listing and issuance rules from the ICSI study material and the Authority's regulations, and note conditions for debt and equity separately.
  7. Practise two or three case questions, writing in the order: provision, application to facts, conclusion.

Common mistakes in An Overview on Listing and Issuance of Securities in International Financial Services Centre

  • Saying the Authority replaces all Indian laws in an IFSC.

    Fix: State that the Authority exercises the powers of the listed regulators in relation to regulation of financial products, services and institutions in IFSCs. Section 31 is the power to direct, by notification, that other Central Acts do not apply or apply with modifications in an IFSC.

  • Confusing section 13 with section 31.

    Fix: Remember: section 13 moves regulatory powers to the Authority. Section 31 lets the Central Government disapply or modify other Central Acts by notification.

  • Writing that penalties are collected in rupees.

    Fix: Penalties are realised in the foreign currency equivalent, and the amounts are then credited to the Consolidated Fund of India in rupees.

  • Giving an incomplete list of financial products or services.

    Fix: Learn the five specified financial product heads (securities; contracts of insurance; deposits; credit arrangements; foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately) plus the sixth residual head for any other product or instrument notified by the Central Government. Group the financial service heads, such as dealing, deposits, custody, insurance, advice and payments.

  • Skipping the application step in case questions.

    Fix: Quote the provision, then match each fact to it, and end with a clear conclusion.

  • Giving wrong section numbers or adding detail from memory.

    Fix: Cite only sections you know, such as 3, 4, 12, 13, 20, 28 and 31, and otherwise state the rule in plain words.

Last-day revision: An Overview on Listing and Issuance of Securities in International Financial Services Centre

  • An IFSC is set up under section 18 of the Special Economic Zones Act, 2005.
  • The Authority is a body corporate with perpetual succession and a common seal, set up under section 4.
  • Section 12 makes it the Authority's duty to develop and regulate financial products, services and institutions in IFSCs.
  • Financial products include securities, contracts of insurance, deposits, credit arrangements, foreign currency contracts other than contracts to exchange one currency for another that are to be settled immediately, and any other product or instrument notified by the Central Government.
  • A financial institution is a unit in an IFSC engaged in rendering financial services for a financial product.
  • Under section 13, powers exercisable by the appropriate regulators under the Acts in the First Schedule are exercised by the Authority in IFSCs, as far as regulation of financial products, services and institutions is concerned.
  • Penalties and fines are collected in the foreign currency equivalent, at the RBI-notified rate on the date of the order.
  • Sums realised as penalties or fines are credited to the Consolidated Fund of India in rupees.
  • Section 20 requires financial services transactions in an IFSC to be in the foreign currency specified by regulations.
  • Section 31 lets the Central Government, by notification, direct that other Central Acts do not apply, or apply with modifications, to financial products, services or institutions in an IFSC.
  • A draft section 31 notification is laid before each House for a total of thirty days, in one session or successive sessions. If both Houses agree to disapprove or modify it, it is not issued, or is issued only as modified.
  • The Authority makes regulations under section 28.

An Overview on Listing and Issuance of Securities in International Financial Services Centre practice questions

An Overview on Listing and Issuance of Securities in International Financial Services Centre in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

An Overview on Listing and Issuance of Securities in International Financial Services Centre: frequently asked questions

What is an International Financial Services Centre?

It is a centre set up under section 18 of the Special Economic Zones Act, 2005, as defined in the IFSCA Act, 2019. GIFT City is the well-known example in India. Separately, section 20 requires financial services transactions in an IFSC to be in the foreign currency specified by regulations.

What does the IFSCA Act, 2019 do?

It establishes the International Financial Services Centres Authority and makes it the regulator for financial products, services and institutions in IFSCs. Under section 13, powers exercisable by the appropriate regulators under the Acts listed in the First Schedule are exercised by the Authority within IFSCs.

What is the power under section 31 of the IFSCA Act?

The Central Government may, by notification, direct that provisions of other Central Acts, rules or regulations do not apply in an IFSC, or apply with exceptions, modifications and adaptations. A draft is first laid before each House of Parliament for a total of thirty days, in one session or successive sessions. If both Houses agree to disapprove or modify it, the notification is not issued, or is issued only in the modified form.

Is this chapter more theory or numerical?

It is mainly theory and law. You are expected to know definitions, the Authority's powers and the listing and issuance framework, and to apply them to short case facts.