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

During an IFSCA inspection of Ganga Capital IFSC Pvt Ltd, the inspecting authority finds that client funds were mixed with the firm's own funds. What is the most appropriate regulatory consequence?

IFSCA may issue a show-cause notice and, after giving the intermediary a hearing, impose penalties, issue directions, or suspend or cancel registration. Enforcement follows natural justice, so action is neither merely advisory nor automatic cancellation without notice.

  1. ANo action, since inspection findings are only advisory and cannot lead to proceedings
  2. BIFSCA may issue a show-cause notice and, after giving a hearing, take action such as a penalty or directions, or suspension or cancellation of registrationCorrect
  3. CAutomatic cancellation of registration without any notice or hearing
  4. DOnly the firm's auditor can be penalised, not the intermediary

Explanation

Inspection findings can lead to enforcement. Principles of natural justice require a show-cause notice and an opportunity of hearing before IFSCA imposes a penalty, issues directions, or suspends or cancels registration. Automatic cancellation without hearing is therefore wrong, and findings are not merely advisory.

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