Consequence of failure to maintain Net Worth by Capital Market Intermediaries (CMIs)
International Financial Services Centres Authority has issued a Circular F. No. IFSCA-DSI-4-2024-Capital Market- dated 5th Sept 2024 under Regulation 6 of International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021 which states that Capital Market Intermediaries (CMIs) who fails to maintain Net Worth at any time shall not undertake any existing or new business activity in IFSC till the time the net worth is restored and effective with immediate effect i.e. 5th Sept 2024.
Applicable to all Capital Market Intermediaries (CMIs) which includes Broker dealers. Clearing members, Self-Clearing member, Depository participants, Investment bankers, Custodians, distributors, Investment advisers, Credit rating agencies, Debenture Trustees, Account Aggregators and any other category of intermediaries, as may be specified by the Authority from time to time.
For Reference: – Regulation 6 of IFSCA (Capital Market Intermediaries) Regulations, 2021: – “An entity seeking registration as a capital market intermediary shall comply with the net worth requirements as specified in Schedule II of these regulations or such other amount as may be specified by the Authority, and the same shall be maintained at all times.
“Net worth” means the aggregate value of the paid-up share capital (or capital contribution) and all reserves created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.
Schedule II- of IFSCA (Capital Market Intermediaries) Regulations, 2021
S.No |
Category |
Net worth requirements |
|
Entities incorporated in India (including IFSC) |
Foreign Entities |
||
| 1 | Broker dealer | As specified by recognised stock exchange | As specified by recognised stock exchange, subject to minimum of USD 135,000 |
| 2 | Clearing Member | As specified by recognised clearing corporation | As specified by recognised clearing corporation, subject to minimum of USD 1,350,000 |
| 3 | Self-clearing member | As specified by recognised clearing corporation | As specified by recognised clearing corporation, subject to minimum of USD 675,000 |
| 4 | Depository Participant | As specified by depository | As specified by depository |
| 5 | Investment Banker | USD 750,000 | USD 1.5 million |
| 6 | Investment Adviser | USD 500,000 | USD 1 million |
| 7 | Custodian | USD 7 million | As specified by the Authority from time to time |
| 8 | Credit Rating Agency | USD 3 million | USD 6 million |
| 9 | Debenture Trustee | USD 1.5 million | USD 3 million |
| 10 | Account aggregator | USD 500,000 | USD 1 million |
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