When whispers become truth

I have a piece with Rashmi Birmole and Yash Vardhan in today's (26 Jan 2026) Financial Express analysing the recent order on insider trading exonerating several people in the Adani Green case. The ruling holds that once information enters the public domain, no matter from where, the information ceases to be non-public information. Trades based after the information seeps in would not be prohibited insider trading laws. 

When Market Whispers Become Truth

Sebi order sensibly expands the safe harbour protections for trading on public information

India’s insider trading enforcement framework has evolved since the overhaul of the insider trading regulations in 2015. Over the past decade, SEBI has refined definitions and concepts, and prosecuted insider trading charges with increasing sophistication. Yet one question that remained to be clearly answered is when information reported in the media about corporate transactions, that haven’t been formally announced, goes from being a mere ‘market rumour’ to ‘generally available information’? This is crucial because if a piece of information is classified as generally available, then a person cannot be penalised for insider trading for trading using such information, regardless of how it was obtained. The idea is that if the information is already publicly available and priced in, then the advantage an insider has over public investors disappears. 

Two recent orders passed by SEBI on December 12, 2025, in the Adani Green Energy–SB Energy matter offer the clearest answer to this question yet.​

Both proceedings stemmed from Adani Green Energy Limited’s (AGEL) May 19, 2021 announcement of share purchase agreements executed with SoftBank Group Capital and Bharti Global to acquire their stake in SB Energy Holdings, a transaction that could potentially increase AGEL’s operational capacity by roughly 46%. SEBI investigated trades executed in days preceding the announcement by entities connected to the Adani group. In the first matter, Vinod Bahety, then Head of M&A at the Adani group, was alleged to have communicated inside information about the acquisition to one Tarun Jain, who through proprietary and controlled accounts, consequently purchased 2 lakh AGEL shares on May 14, 2021. In the second, Pranav Adani, a director across multiple Adani entities, was alleged to have tipped his relatives, who purchased AGEL shares on May 17 and 18, 2021. All noticees were exonerated of the insider trading charges without directions, penalties or any directions for disgorgement.​

What is particularly curious about this matter is the multiple instances of contradictions between the adjudicating officer’s (AO) conclusions and the findings of the investigating authorities, as captured in the investigation report (IR). The AO’s evaluation of information reported about the acquisition revealed that the very information that SEBI’s own investigating authority had classified as ‘UPSI’ had been in the public eye for most of the UPSI period in question. The AO found that by May 16, 2021, three days before AGEL’s formal announcement, newspapers reported detailed and specific information about the acquisition, including the stage of the transaction, expected valuation of SB Energy and timelines, that the AO noted is the same information which has been alleged as UPSI, that the noticees supposedly possessed and traded on. The AO rejected the investigating authority’s findings about the news reports being speculative merely on the basis that none of the parties to the transactions provided any comments to the media. 

Interestingly, the findings indicate that SEBI may have silently accepted that UPSI related to the acquisition was not in existence as on May 18, 2021, which contradicted the IR’s claim that UPSI had existed since April 29, 2021. This was because on May 18, BSE had accepted a disclosure from AGEL to the effect that there was no event that required any disclosure and no definitive agreement was signed at that stage. Ironically, the IR itself recognised this announcement as a major one, leading to an increase in the price of AGEL shares. 

The concept of ‘generally available information’ sits at the core of the UPSI definition under Regulation 2(1)(n) of the PIT Regulations. Information qualifies as UPSI only if it is not generally available, where generally available means information accessible to the public on a non-discriminatory basis. This formulation was deliberate, the High-Level Committee that drafted the PIT Regulations recognised that the Indian insider trading framework was founded on the principle of information parity across all market participants, and that information asymmetry, not mere possession of information, is what is prohibited. 

Until now, the doctrine has been applied rather conservatively. Curts and tribunals have been careful to distinguish between vague market chatter and what can be considered a concrete and credible disclosure of information about a potential corporate action, in the context of insider trading allegations. The traditional view was that where an issuer denies or declines to confirm media speculation about a transaction, market participants were entitled to treat the matter as unresolved. 

The Adani Green orders recalibrate this understanding. The AO reasons that if the information reported in the media is specific and accurate, as evidenced by the eventual exchange announcement made on May 19, 2021, then it can be categorised as generally available, regardless of whether the entities involved confirm/comment on any media reports. If negotiations for a significant acquisition are underway and press reports accurately describe them, that information is considered to be already available in the market as it becomes accessible to public at large.​

The orders, treat AGEL’s May 18 clarification as immaterial. Once detailed news reports appeared on May 16, the information had entered the public domain for insider trading purposes, regardless of what the company itself said two days later. Through the Adani Green orders, SEBI has given clearer guidance that detailed, credible financial press coverage of upcoming deals or corporate actions may be treated as ‘general availability’ of inside information about the deal, provided it is accurate, even where the issuer has not confirmed or commented on such coverage. This order sensibly expands the safe harbour protections for trading on public information whether it originated from the company itself or was otherwise available. 

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Enabling acquisition finance

The RBI is cautiously allowing banks to play a more constructive role in India’s M&A landscape. I have a piece with Manas Dhagat and Pranjal Kinjawadekar in today’s Financial Express:

M&A activity in India has entered a period of sustained strength. In 2024 alone, deal-making touched nearly USD 120 billion as Indian companies continued to acquire domestic businesses at a rapid pace. That momentum has carried into 2025, with another USD 50 billion in deals reported in the first half of the year.

The commercial banks in India, despite holding one of the country’s deepest pools of domestic capital, have largely remained spectators. This is largely attributable to the Reserve Bank of India maintaining a conservative approach on permitting bank’s exposure to the capital markets. Under the provisions of the Banking Regulation Act, 1949, and the directives issued under the RBI Master Circular on Loans and Advances, banks are prohibited from granting loans or advances for the purpose of acquiring shares of other companies, including financing corporate takeovers or management buyouts except to the extent of infrastructure sector. The rationale behind this restriction is to ensure that banking funds, which are primarily public deposits, are not exposed to the inherent risks associated with volatile equity investments. But as M&A activity grows in scale and banks push for a larger role, the RBI is rethinking these restrictions.

Historically, banks’ capital market exposures have been subject to tight prudential limits, and bank financing for the acquisition of shares has generally been prohibited. Against the backdrop of a more mature capital market and a stronger banking system, the RBI through its Statement on Developmental and Regulatory Policies has proposed a calibrated easing and rationalisation of these norms, including permitting acquisition finance, widening the scope of lending against securities, and moving towards a more principle-based framework for lending to capital market intermediaries. Pursuant to this announcement, on October 24, 2025, the RBI released the draft RBI (Commercial Banks – Capital Market Exposure) Directions, 2025 (Draft Directions). These directions are proposed to come into force from April 01, 2026. The Draft Directions apply to all commercial banks, except small finance banks, regional rural banks, local area banks and payments banks.

Under the Draft Directions, capital market exposure of banks shall include both their direct exposures and indirect exposures, including investment exposure and credit exposure. Investment exposure refers to bank’s direct or derivative exposure to equity-linked instruments including direct holdings in equity shares, preference shares, convertible securities, units of equity mutual funds and units of AIFs. Credit exposure, however, stretches wider. It captures everything from acquisition finance to promoter funding, loans secured against marketable securities, bridge loans against anticipated equity infusions and financing backed by mutual fund units (other than debt schemes). Over time, these categories developed through a patchwork of standalone circulars and context-specific directions; the Draft Directions now consolidate them into a single, coherent, and principles-based framework.

One of the most significant components of the draft is the framework for acquisition finance, an area India has historically tiptoed around. While Indian companies often relied on overseas bank funding for cross-border acquisitions, domestic financing of acquisitions (apart from infrastructure) remained a grey area. The Draft Directions provide a clear definition of ‘acquisition finance’, as funding extended directly to an acquiring company, or its SPV, for the purchase of all or a controlling stake in a target company’s shares or assets.

However, the RBI has not thrown caution to the wind. The Draft Directions construct a high wall around who can borrow and how much. RBI proposes eligibility filters at both ends of the transaction. The borrower must be a listed Indian body corporate with a satisfactory net worth and at least three years of profitability. The target must have three years of audited financials and must not be a related party. In substance, this ensures that acquisition finance flows to strategic, long-term transactions rather than promoter-level restructurings or intra-group self-deals. The emphasis on long-term value creation is a recurring theme throughout the Draft Directions.

While the Draft Directions permit banks to finance acquisitions involving controlling stakes, often exceeding 51%, such financing remains subject to Section 19(2) of the Banking Regulation Act, which restricts banks from holding, whether as pledgee or absolute owner, more than 30% of a company’s paid-up share capital. Further, the Draft Directions also permit the banks to take additional collateral, subject to their internal policies. Yet where the target is a public company, its ability to offer guarantees or other forms of security may be limited due to the Companies Act, 2013, which restricts financial assistance for the purchase of its own shares.

The prudential framework surrounding acquisition finance is deliberately tight. To contain systemic risk, the RBI has capped a bank’s aggregate exposure to this segment at 10% of its Tier 1 capital (bank’s core equity capital available to absorb losses). In terms of funding limits, a bank may fund only up to 70% of the acquisition value; the remaining 30% must come from the acquirer’s own equity, ensuring meaningful ‘skin in the game’. The Draft Directions require banks to undertake regular monitoring, stress tests, early-warning assessments and valuation checks, creating a tightly controlled environment for acquisition financing.

Against this backdrop, the case for allowing banks to play a more direct role in acquisition financing becomes clearer. Financial sovereignty allows capital flows to be shaped domestically while reducing exposure to external shocks. This objective is advanced when long-term corporate growth is supported by domestic capital rather than offshore funding. Creating regulated pathways for banks to support strategic acquisitions therefore becomes essential, with acquisition finance emerging as the link that enables Indian corporates to execute complex transactions through stable, domestically anchored banking channels. 

The Draft Directions represent one possible regulatory response: opening the door to acquisition financing while surrounding it with tight safeguards to preserve systemic stability. While the framework signals a shift, its operational window remains narrow, with stringent eligibility, collateral, and prudential conditions limiting its applicability to a small segment of corporates. Even so, the direction of travel is clear. The RBI is cautiously laying the groundwork for banks to play a more constructive role in India’s expanding M&A landscape, with the final Directions likely to determine how this balance between flexibility and restraint is ultimately struck. Ultimately, this will help with Indian companies achieving scale, without depending solely on foreign loans. 

From Retention to Rights: Intermediaries to Recalibrate for DPDP Compliance

I have a piece with Pragya Garg and Yash Vardhan in today's Financial Express on the newly notified data privacy law and its impact on the financial market, and securities market in particular. "What emerges is a regulatory architecture in transition, shifting from a retention-based model to one centred on rights, proportionality and accountability." The full piece is below:

On November 13, 2025, the Ministry of Electronics and Information Technology notified the implementation timelines for the Digital Personal Data Protection Act, 2023 (Act) and published the final version of the Digital Personal Data Protection Rules, 2025 (Rules). Although implementation of both the Rules and the Act follows a staggered model, with core operational obligations applicable from May 2027, data fiduciaries (person(s) determining means and purpose of processing data) now have an 18-month transition window to realign their systems and practices to the new regime. In this backdrop, India’s securities market, though already operating under data governance structures that may appear akin to privacy frameworks, is now at an inflection point that calls for closer regulatory scrutiny.

Take, for instance, data retention obligations. Much like the Digital Personal Data Protection (DPDP) framework, SEBI requires its registered intermediaries to preserve specified data sets. Stockbrokers, for example, must maintain books of account, records and documents for a period of five years. But these requirements were designed with a different purpose in mind: market surveillance, anti-money laundering compliance and investor dispute resolution. The regulatory architecture, therefore, treated data primarily as an asset to be retained, rather than as a right to be managed.

While confidentiality obligations do exist, their force lies largely within operational circulars, and their application can be diluted through broadly worded consents embedded in standard-form client documentation. Data security has been addressed primarily through IT governance norms and cybersecurity standards. Yet one key element remains absent, a systematic obligation to delete or erase personal data once its regulatory or operational purpose has been met. As a result, investors’ personal data within the securities market may continue to accumulate over time in the absence of effective deletion and data minimisation protocols.

Regulators are now poised to review their existing guidelines to ensure that financial regulations and data protection laws align with the Act’s requirements, thereby preventing any conflict between sectoral mandates and core data protection principles. A key area of focus is expected to be the “Know Your Customer” (KYC) regime. The current KYC Master Directions, derived from the Prevention of Money Laundering Act (PMLA), require regulated entities to collect and retain certain customer data for the provision of financial services. While consent is mandatory for obtaining such information, any additional data gathered under a customer acceptance policy will now require a sound legal basis and must conform to the Act’s principle of data minimisation.

In line with this shift, regulators may issue instructions on setting appropriate data retention periods for AML/KYC processes, clarifying that customer data should be retained only as long as necessary to meet statutory AML obligations. They may also reiterate that while sharing customer data with authorities for AML purposes constitutes a legitimate interest under the Act, such sharing must be both necessary and proportionate to the request made.

Further, intermediaries may be required to respect customer rights under the Act including the right to access data and rectify inaccuracies, even within AML/KYC procedures. Regulators may encourage the use of Data Protection Impact Assessments (DPIAs) to evaluate potential privacy risks and update related instructions on customer protection, third-party due diligence, monitoring and data privacy to bring them in line with the new legal framework.

What emerges is a regulatory architecture in transition, shifting from a retention-based model to one centred on rights, proportionality and accountability. The challenge for the securities market will be to pivot without compromising the robustness of market surveillance and financial integrity.

Another interesting aspect to note is that the emerging Consent Manager regime under the DPDP framework may sit alongside, and potentially intersect with the existing Account Aggregator (AA) ecosystem. The AA framework has already created a consent-driven infrastructure for financial data sharing, with standardised consent artefacts, open APIs, and a large set of regulated financial institutions participating across multiple regulators. In contrast, the Consent Managers envisioned under the Act are designed as sector-agnostic intermediaries, enabling data principals to give, manage, review and withdraw consent for various categories of personal data, with registration and oversight placed under the Data Protection Board. 

Notably, both frameworks share key conceptual building blocks, including interoperable platforms, consent logging, limits on accessing underlying data and restrictions on outsourcing. This raises an important policy question: can the two systems be read harmoniously? One potential approach could be to treat AAs as specialised consent managers for financial data, or alternatively, to align the technical and legal standards so that intermediaries are not forced to navigate two parallel, and possibly overlapping, consent infrastructures.

Such integration, however, would require careful cross-regulatory coordination and may emerge gradually, shaped by regulatory guidance and industry practice rather than by a single, definitive policy shift.

Further, the issue of outsourcing responsibility reflects a principle already embedded within securities regulation but the DPDP framework may expand its scope in ways that warrant deeper examination. Historically, SEBI regulations have held intermediaries accountable for compliance lapses by third parties to whom functions are outsourced, even when the intermediary has limited operational control. The DPDP regime adopts a similar approach: a data fiduciary remains liable for breaches by data processors, irrespective of contractual arrangements.

However, DPDP may broaden the dimensions of liability by including privacy-related obligations not traditionally captured in securities regulation. An intermediary could now face exposure if an outsourced vendor mishandles consent withdrawal requests, fails to deploy mandated security safeguards, or retains personal data beyond approved timelines. Such developments may compel intermediaries to revisit and re-negotiate existing contracts with processors to explicitly embed DPDP obligations, particularly for entities reliant on cloud providers, payment gateways or external data vendors. Service agreements that historically focused on operational metrics may now need to be recast through the lens of privacy compliance.

As the securities market transitions from retention-centric to deletion-centric protocols, from bundled consent to granular controls, and from operational oversight to privacy-centric governance, early adopters may find a competitive edge. Intermediaries that build transparent, user-friendly consent systems, automate deletion for non-regulatory data, and communicate privacy-first practices to clients could cultivate stronger trust, turning compliance into a market differentiator.

Aligning Profit and Protection - Insights on SEBI’s Mutual Fund Reforms

I have a piece with Aniket Singh Charan and Varun Matlani in yesterday’s Financial Express on SEBI’s proposal to change regulations with respect to mutual funds, in particular it’s attempt to reduce the fees a fund can charge. We argue that a regulator, in the absence of proof that competition is not working, should not be setting rates. While it appears investor friendly, the second order effects of price caps include reversing financial inclusion and dis-advantaging smaller players to name two. 

In 1774, a Dutch merchant and broker established what is widely regarded as the first mutual fund by inviting investors to form a trust named Eendragt Maakt Magt meaning “Unity Creates Strength.” Over time, the mutual fund structure has evolved across jurisdictions. Continuing this process, on October 28th, 2025, the Securities and Exchange Board of India (SEBI) released a Consultation Paper on Comprehensive Review of SEBI (Mutual Funds) Regulations, 1996 (MF Regulations)(Consultation Paper), proposing amendments to the existing framework to align the distribution of returns between Asset Management Companies (AMCs) and investors. A few of the major changes, that are the source of heated discussions in the industry are discussed below.

The first such change is the proposal to revise the Total Expense Ratio (TER) limits such that statutory levies (such as STT and GST) are excluded from the computation of the TER. It is proposed that such levies may be passed directly to investors. While this shift enhances transparency and aligns cost pass-through with regulatory intent, it also triggers a consequential downward revision of the existing TER limits. Specifically, the Consultation Paper recommends a reduction of 20 bps for close-ended schemes, and 15 bps and 10 bps for certain categories of open-ended schemes. The magnitude of the proposed downward revision lacks any clear basis and poses concerns for the growth of the mutual fund industry. The downward revision of the TER, exceeds the GST and other statutory components currently a part of the TER and the consequence is an additional, unintended reduction that directly compresses the operating margins of AMCs. In effect, AMCs are compelled to absorb a cost cut that goes beyond the statutory levy adjustment, with no proportionate benefit accruing to investors. Moreover, when AMC revenues are squeezed, the impact is often passed on to MFDs, weakening the distribution network that underpins financial inclusion. A large share of first-time and retail investors especially in smaller towns and underserved regions enter the mutual fund market through these last-mile channels. Any reduction in the economic viability of this network risks undermining the infrastructure that enables widespread investor participation. Mutual funds indeed compete with other assets like insurance and real assets such as property and gold.

In the present day, fees should be determined entirely by market competition, and price controls are increasingly viewed not only as outdated but also as counterproductive. Their second order effects are routinely underestimated in policy debates. Forcing fees artificially downward inevitably erodes service quality, curtails investment in research and investor support, and strips smaller or newer funds of the economic runway needed to grow. The result is predictable, entrenched dominance by a few large players and a shrinking, less diverse industry. Over time, such distortions choke innovation, reduce meaningful choice for investors, and weaken the resilience of the asset management sector that regulation is meant to strengthen. The only reason to impose price controls would be when the normal competitive forces are ineffective as in a monopolistic industry with network effects. Mutual funds are highly competitive an industry.

The Consultation Paper also proposes to permit AMC to charge its schemes investment and advisory fees that are identical, in percentage terms, for both direct and regular plans. While this could be viewed as a welcome and well appreciated move, the unintended impact of the same would be a consequent increase in the overall costs borne by regular plan investors who choose to access mutual funds through MFDs. This too, needs to be carefully studied as investors investing in the market though MFDs are often first time investors who may now be subject to higher overall costs.

Another significant proposal in the Consultation Paper is the steep reduction of the maximum permissible brokerage expense from 12 bps to 2 bps for cash market transactions and 5 bps to 1 bps for derivatives. The stated rationale is that brokerage costs in some instances include not only trade execution but also research services, and since AMCs already possess in-house research capabilities, such additional costs may dilute investor returns. While the objective of enhancing transparency and avoiding duplication of expenses is well-intentioned, the practical realities are more nuanced. In many market segments particularly mid-cap, small-cap, and emerging sectors broker-provided research offers timely, security-specific, and sectoral insights may not be readily available through internal or public sources. Such research plays a complementary role to in-house analysis and supports informed price discovery, ultimately benefiting investors. Brokerage commissions therefore often reflect an integrated service rather than an avoidable add-on cost. A sharp reduction in permissible brokerage limits may constrain AMCs' access to critical external research inputs and could inadvertently impair investment decision-making to the detriment of unitholders.

The Consultation Paper also proposes several amendments to Regulation 24(b) of the MF Regulations, which governs the permissible business activities of AMCs. One such proposal, that an AMC may undertake activities regulated by a domestic or foreign regulator only through a subsidiary and with prior SEBI approval, warrants reconsideration. Where an AMC already maintains adequate structural and operational segregation, and the concerned activities are carried out by a distinct business unit with appropriate oversight, compliance frameworks, and ring-fencing of resources, it may not be necessary to mandate a subsidiary structure. Allowing AMCs to undertake such activities directly, through a distinct business unit, subject to obtaining approvals or no-objection certificates from the regulators with whom they are already registered, would provide greater operational flexibility without compromising regulatory safeguards. This approach would also prevent unnecessary duplication of infrastructure and compliance costs while ensuring that investor interests remain fully protected.

The Consultation Paper walks a careful tightrope between rationalising costs and advancing investor-friendly reforms. However, several aspects warrant deeper examination. The proposed reductions in expense ratios and related regulatory changes compound the pressures already confronting AMCs and risk further eroding margins that are, in many cases of smaller players, already thin. What often remains underappreciated in policy debates is the inherently long gestation period of the AMC business model. Most AMCs operate at a loss for years before achieving the scale necessary to turn profitable. The contemplated amendments risk intensifying this structural challenge and may require deeper analysis of operational feasibility before implementation.

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Easing investments via IFSC

I have a piece in today's Financial Express with Aniket Singh Charan on easing investments via the GIFT city and how recent regulatory changes will help that. 

On August 12, 2025, the International Financial Services Centres Authority (IFSCA) released a circular titled “Regulatory Framework for Global Access Providers”. The circular marks a key step towards clarifying the regulatory framework around Global Access Providers (GAPs) and sets the tone for the next phase of investments through IFSCs.

Historically, Indian investors relied on foreign brokers operating outside the purview of domestic regulators to invest in foreign securities thereby raising concerns over transparency and investor protection. To address this, the IFSCA introduced the concept of GAPs in 2021. GAPs are intermediaries authorised to facilitate access to global financial products and services through regulated international exchanges and foreign brokers. Initially, only IFSCA-registered broker-dealers and recognised stock exchanges could access overseas markets, either via cross-border arrangements with regulated entities or by registering as trading members of foreign exchanges (limited to proprietary trading). For broker dealers, such access required a no-objection certificate from the recognised IFSC exchange.

On April 17, 2025, the IFSCA (Capital Market Intermediaries) Regulations, 2025 were notified thereby revamping the framework for the regulation, registration, and supervision of capital market intermediaries operating in IFSCs. Consequently, the IFSCA chose to further deliberate on how entities in IFSCs provide global access and whether the status quo should be maintained. 

Thereafter, on May 08, 2025 the IFSCA released a consultation paper seeking public comments on certain proposals in relation to GAPs (CP 1). The key objective of CP 1 was to introduce clear rules on the registration of GAPs, provide operational modalities, detail permitted products and responsibilities of broker-dealers, define client disclosures, KYC/AML/CFT compliance, code of conduct, periodic reporting, fee structures, and other regulatory requirements. 

CP 1 faced criticism for its narrow eligibility criteria for GAP registration. It allowed only subsidiaries of recognised stock exchanges or foreign brokers with IFSC subsidiaries to act as GAPs, effectively excluding IFSCA-registered broker-dealers. This created an uneven playing field. While foreign brokers with group entities holding overseas memberships could offer market access directly, IFSC-based broker-dealers without such memberships would be forced to route access through other GAPs. The framework was thus seen as restrictive and disadvantageous to domestic participants.

To rectify these defects, on May 30, 2025 the IFSCA published a revamped consultation paper (CP 2) that introduced several key changes. The most significant change was that the definition of GAPs was broadened to allow IFSCA-registered broker-dealers to seek registration as GAPs, provided they enter into formal arrangements with foreign brokers that are trading members of a foreign stock exchange to facilitate global market access. This significantly widened participation and would have the effect of creating greater opportunities for investors to diversify globally through regulated channels.

CP 2 was subject to further comments from the public. In this regard, industry participants identified a major issue concerning the selection of foreign brokers with whom GAPs could enter into agreements. As per CP 2, a GAP was permitted to enter into an agreement only with a foreign broker who was registered as a trading member of a stock exchange in the relevant foreign jurisdiction and who complied with the applicable regulatory requirements of that jurisdiction for providing access to stock markets. This regulatory approach created several challenges, particularly when compared with international practices. For instance, in jurisdictions such as the United States of America, the concept of a “broker-dealer” is distinct from that of a “trading member.” A broker-dealer is primarily licensed to engage in securities trading and investment services for clients, whereas a trading member (often referred to as a member of an exchange) is focused on direct participation in the exchange for execution of trades. A broker-dealer is capable of providing multi-dimensional access to the markets in a foreign jurisdictions through tie ups with various trading members. For example, a FINRA-registered broker-dealer could have tie ups with trading members on NYSE, NASDAQ etc. and could act as a single point of contact in the concerned foreign jurisdiction for the GAP, however, it was effectively excluded from entering into agreements with GAPs. 

The circular issued on August 12, 2025, identified the issues surrounding this restriction and eased the same considerably. A GAP may now enter into an agreement to provide access with any foreign broker that is duly regulated or registered as a broker (by whatever name called) in its home jurisdiction, provided that such broker offers access to global markets in compliance with applicable laws. Thus, the requirement for the foreign broker to also be a trading member of a stock exchange in the concerned foreign jurisdiction has been done away with. Importantly, foreign brokers are now permitted to further extend access to multiple jurisdictions through their own arrangements, thereby enhancing flexibility and broadening the scope of market access available to investors.

The evolution of the framework around GAPs reflects the progressive approach adopted by the IFSCA. This steady regulatory deepening highlights IFSCA’s dual commitment - to ensure adequate supervision while simultaneously promoting and developing IFSCs as a global investment hub.

The benefits of this revamped approach are significant. First, it is likely to encourage more Indian entities to establish broker-dealer operations within IFSCs, thereby deepening the ecosystem and positioning India as a credible player in cross-border financial services. Second, it provides Indian investors with a transparent, reliable, and regulated alternative for accessing global markets, moving decisively away from earlier unregulated routes. Third, the framework enhances regulatory oversight over the deployment of funds overseas, thereby strengthening investor protection and reducing risks. Finally, by aligning with global best practices, the framework is expected to improve service standards, enhance investor experience, and foster higher quality intermediation in outbound investment channels. 

Only time will tell how much capital will be channelled through GAPs, but industry response so far has been largely positive. The hope is that this framework will encourage greater investment through a regulated and supervised route. Its ultimate success, however, will depend on how IFSCA shapes the regulatory framework going forward, striking the right balance between ease of doing business and investor protection.