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CS Professional · IFSCA - Regulations, Listing and Compliances · Capital Market Intermediaries

During an IFSCA inspection of a broker-dealer in GIFT IFSC, the inspecting officer finds that client funds were mixed with the firm's own funds. The Authority wants to hear the firm before deciding on action. Which approach best reflects the enforcement process?

IFSCA should issue a show-cause notice and give the firm a hearing before ordering a penalty or direction. Inspection findings only start the process, and natural justice requires the intermediary to be heard. Immediate penalty without notice or deferring to auditors is not the correct process.

  1. AIssue a show-cause notice giving the firm an opportunity of being heard before imposing a penalty or other directionCorrect
  2. BImpose a penalty immediately without any notice, because the breach is evident
  3. CRefer the matter to the firm's auditors for decision
  4. DWait for a client to file a civil suit before taking any action

Explanation

Enforcement follows natural justice: findings from the inspection lead to a show-cause notice and an opportunity of hearing before the Authority passes an order. Option B skips the hearing, which is contrary to the principle. Auditors have no power to adjudicate.

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