Policing Market Integrity in GIFT City: Understanding the IFSCA’s New Market Abuse Regime
Introduction
The International Financial Services Centres Authority (IFSCA) has notified the IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026 (“PMA Regulations”), replace the applicability of the SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Prohibition of Fraudulent and Unfair Trade Practice relating to Securities Market) Regulations, 2003 in the IFSC. For entities listed, or proposing to list, on recognised stock exchanges in GIFT City, this is one of the year’s most consequential securities-market compliance developments, i.e., the introduction of a unified regulatory framework governing insider trading and manipulative, fraudulent, and unfair trade practices in the IFSC securities market.
A Unified Framework to prevent Market Abuse
The Market Abuse Regulations bring together restrictions relating to:
- communication and procurement of material non-public information (“MNPI”);
- trading while in possession of MNPI;
- disclosure obligations applicable to designated persons; and
- manipulative, fraudulent and unfair trade practices in the securities market.
The Regulations adopt a broad definition of an ‘insider’. An insider includes a connected person as well as any person who is in possession of, or has access to, MNPI. A ‘connected person’ is broadly defined to include persons associated with an entity, directly or indirectly, during the preceding six months, including through contractual, fiduciary or employment relationships, directorships, professional or business relationships, or any position that provides, or is reasonably expected to provide, access to MNPI. The practical consequence is that the compliance perimeter is not limited to directors and employees alone. Advisers, consultants, professional service providers, lenders, underwriters, business partners and other persons receiving MNPI for legitimate purposes may also fall within the regulatory framework.
Restrictions on Communication of MNPI
An insider is prohibited from communicating, providing or allowing access to MNPI relating to an entity or its securities, except where the communication is in furtherance of a legitimate purpose, performance of duties or discharge of legal obligations. The Regulations expressly recognise legitimate-purpose sharing in the ordinary course of business with persons such as partners, collaborators, lenders, customers, suppliers, lead managers, underwriters, legal advisers, auditors and other advisers or consultants. However, a person who receives MNPI pursuant to a legitimate purpose will itself be treated as an insider and must comply with the Market Abuse Regulations.
Trading While in Possession of MNPI
The Regulations prohibit an insider from trading, or causing another person to trade, in securities listed or proposed to be listed while in possession of MNPI.
Where a person trades while possessing MNPI, the Regulations create a presumption that the trade was executed on the basis of such information. The person may rebut this presumption in specified circumstances, including certain bona fide regulatory or statutory transactions, qualifying transactions between insiders possessing the same MNPI, exercise of stock options and trades undertaken pursuant to an irrevocable trading plan disclosed to the recognised stock exchange at least 120 days in advance.
Disclosure Obligations for Designated Persons
Every listed entity must establish a policy governing disclosures by its designated persons. A designated person must disclose acquisitions or disposals of specified securities by themselves or their immediate relatives where the aggregate traded value during a calendar quarter exceeds USD 25,000, or such other threshold as may subsequently be specified by IFSCA.
The disclosure is required within two trading days of the transaction. The listed entity must, in turn, notify the recognised stock exchange(s) and host the disclosure on its website within two working days of receiving the disclosure.
Notably, “specified securities” extends beyond equity securities to include debt securities and derivative instruments of the listed entity.
Prohibition on Market Manipulation
Chapter III establishes broad prohibitions against manipulative, fraudulent and unfair trade practices.
The Regulations specifically identify a range of prohibited conduct, including:
- creating a false or misleading appearance of trading;
- transactions intended to artificially influence the price or trading activity of securities;
- circular trading;
- artificial creation of demand or price;
- repeated placement and cancellation of orders without an intention to execute them;
- dissemination of false or misleading information;
- planting false or misleading news;
- fraudulent inducement to trade;
- mis-selling of securities or securities-related services;
- manipulation of books of account or financial statements where it impacts securities prices; and
- diversion or siphoning of assets or earnings that directly or indirectly manipulates securities prices.
The list is expressly non-exhaustive, meaning that conduct may fall within the prohibition even if it is not specifically enumerated in the Regulations.
Internal Controls Become a Core Compliance Requirement
Every listed entity is required to establish an adequate and effective system of internal controls and a code of conduct to prevent market abuse.
The internal control framework must, among other things, provide for:
- identification and confidentiality of MNPI;
- appropriate restrictions on procurement and communication of MNPI;
- identification of employees having access to MNPI; and
- periodic review of the effectiveness of such controls.
Consequences for violation
Contravention of the Market Abuse Regulations may attract action under the IFSCA Act and corresponding regulatory provisions. In addition, IFSCA may, in appropriate cases and without prejudice to other regulatory action, issue a warning or censure or suspend or cancel the registration of a person regulated by IFSCA.
Practical Takeaways
For entities and intermediaries operating in GIFT City, the PMA Regulations call for an early compliance review, including:
- reviewing and updating insider trading and market-abuse policies;
- identifying designated persons and persons likely to have access to MNPI;
- establishing appropriate information barriers and need-to-know protocols;
- reviewing procedures for disclosure of trades by designated persons and their immediate relatives;
- updating codes of conduct and employee trading policies;
- reviewing confidentiality arrangements with advisers, lenders, consultants and other third parties;
- implementing appropriate controls over digital and electronic dissemination of sensitive information;
- assessing surveillance and escalation mechanisms for potentially manipulative or unusual trading activity; and
- aligning existing compliance manuals and training programmes with the IFSCA framework.
Entities proposing to list in the IFSC should consider these requirements as part of the pre-listing compliance exercise.
The notification of the IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026 represents an important step towards establishing a distinct and comprehensive securities-market integrity framework for the IFSC.
