IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026: GIFT City Gets Its Own Insider Trading and Fraud Law

At a Glance

For years, insider trading and fraudulent-practice issues arising within India's only International Financial Services Centre have been governed by SEBI regulations that were designed for the wider domestic market and merely extended to GIFT City. That arrangement ends now. The Authority has replaced it with a purpose-built regulation that reflects how GIFT City's securities market actually operates — dollar-denominated disclosure thresholds, IFSC-specific defences to insider trading, and a compliance architecture designed for entities listed on IFSC exchanges rather than on the BSE or NSE.

What Changed?

The Regulations do not amend an existing IFSC rulebook — they replace one entirely. Until 31 August 2026, market abuse within the IFSC was governed by two SEBI regulations originally written for the domestic Indian securities market. From 1 September 2026, a single, IFSC-specific regulation takes over.

Why This Matters

GIFT City has been positioning itself as India's answer to Singapore and Dubai for cross-border financial services, and a credible market-abuse framework is a prerequisite for that ambition. Until now, IFSC entities technically operated under regulations built for an entirely different market structure, currency and investor base. A dedicated framework signals to global investors, fund managers and listed entities that the IFSC's capital markets have matured enough to warrant their own conduct rules — and it removes the interpretive uncertainty of applying rupee-denominated, domestically-designed SEBI regulations to a dollar-denominated offshore centre.

Who Is Affected?

The Regulations apply only within the International Financial Services Centre. Entities and individuals with no connection to a recognised stock exchange in the IFSC are not affected.

Detailed Analysis: What the Regulations Require

The Foundational Definitions

Regulation 3 carries sixteen definitions that determine how far the framework reaches. A few merit special attention because they widen the net beyond formal designations:

• Connected person covers anyone associated with an entity in the six months before the relevant act — through frequent communication with its officers, a contractual or fiduciary relationship, or any professional or business relationship that could reasonably be expected to give access to material non-public information. Formal employment is not required.
• Insider is defined even more broadly: it includes any connected person, and separately, any person who is simply in possession of, or has access to, material non-public information — irrespective of how that access arose.
• Material non-public information (also called unpublished price-sensitive information) is information that is not generally available and, once it becomes generally available on a non-discriminatory basis, is likely to materially affect the price of the entity's securities. Regulation 3(1)(l) lists sixteen illustrative categories, including financial results, changes in capital structure, mergers and de-mergers, key managerial changes, rating changes (excluding ESG ratings), fundraising proposals, defaults on debt, insolvency-related filings, forensic audits, and regulatory or judicial action against the entity.
• Mule account is a new, explicitly defined concept: a trading, demat or linked bank account held in one person's name but effectively controlled by another, whether or not that other person pays the consideration for the trades. This is folded directly into the definition of "dealing in securities," closing a route that has historically been used to disguise beneficial trading.
• Designated person means the controlling shareholders and directors of a listed entity, plus any other persons the listed entity itself chooses to categorise as such — giving entities some flexibility, but also an obligation, to widen the net internally where appropriate.
• Fraud is defined broadly under Regulation 3(1)(f) to cover any act, expression, omission or concealment made while dealing in securities to induce another person to deal — including a knowing misrepresentation or concealment of a material fact, a reckless or careless representation, a promise made without intent to perform it, or deceptive conduct that deprives another of informed consent. This definition underlies the general prohibition in Regulation 7 and the specific manipulative-practice list in Regulation 8.
• The Regulations also protect genuine market commentary: the Explanation to the fraud definition clarifies that good-faith general comments on government economic policy, a country's economic situation, or trends in the securities markets are not "fraud" for this purpose, whether made publicly or privately.

Chapter II: Restrictions on Communication and Trading by Insiders

Regulation 4 prohibits an insider from communicating, providing, or allowing access to material non-public information to any person, including other insiders, unless the communication is in furtherance of "legitimate purposes," the performance of duties, or the discharge of legal obligations. The Explanation to this regulation specifically protects routine information-sharing in the ordinary course of business with partners, lenders, customers, suppliers, lead managers, underwriters, legal advisors, auditors and insolvency professionals — provided the sharing is not a device to evade the prohibition. Anyone who receives such information for a legitimate purpose becomes an "insider" themselves and must handle it accordingly.

Regulation 5 is the core insider-trading prohibition: no insider may trade, or cause another person to trade, in listed or to-be-listed securities while in possession of material non-public information. Critically, Regulation 5(2) creates a presumption — if a person traded while possessing such information, it is presumed the trade was made on the basis of that information. The burden shifts to the trader to rebut this presumption.

Regulation 6 imposes a disclosure obligation on designated persons. Where the aggregate traded value of specified securities acquired or disposed of by a designated person, or their immediate relatives, exceeds USD 25,000 in a calendar quarter (whether in one transaction or several), the designated person must disclose the trade to the listed entity within two trading days. The listed entity must, in turn, notify the recognised stock exchange and publish the disclosure on its website within two working days of receiving it. "Specified securities" here covers equity instruments (equity shares, convertible debentures, preference shares and share warrants), debt securities, and other derivative instruments of the entity.

Chapter III: Prohibition of Manipulative, Fraudulent and Unfair Trade Practices

Regulation 7 sets out the general prohibition — no person may deal in securities fraudulently, use a manipulative or deceptive device, employ a scheme to defraud, or engage in any act or course of business that operates as fraud or deceit in connection with dealing in or issuing listed securities.

Regulation 8 gives this teeth by deeming certain conduct to be manipulative, fraudulent or unfair trade practice. The list runs to 23 clauses, and the Regulations make clear this list is illustrative, not exhaustive — any conduct falling within Regulation 7's general prohibition is caught even if it isn't specifically named here.

Chapter IV: Institutional Mechanisms, Enforcement and Relaxation

Regulation 9 requires every listed entity to put in place an adequate and effective system of internal controls and a code of conduct. At minimum, these controls must identify and preserve the confidentiality of material non-public information, restrict its procurement and communication, identify employees with access to it, and undergo periodic review.

Regulations 10 and 11 deal with enforcement: any contravention is dealt with under the corresponding provisions of the IFSCA Act, 2019, and the Authority may, by a reasoned written order, issue a warning or censure, or suspend or cancel the registration of a regulated person, without prejudice to any other action available under the Act.

Regulations 12 and 13 give the Authority general powers to remove difficulties in interpreting or applying the Regulations, and to specify additional norms, procedures or clarifications through subsidiary instructions.

The Regulations also carry a relaxation mechanism (numbered as sub-regulation 15 in the notified text, though it functions as the fourteenth substantive regulation): the Authority may, for recorded reasons and in the interest of developing the IFSC's financial services market, relax strict enforcement of any requirement. An applicant must file a written application with full grounds and pay a non-refundable fee specified by the Authority; the Authority must then process the complete application — including responses to any clarifications sought — within sixty days and record its reasons for granting or refusing the relaxation.

Old vs New: SEBI Regime vs IFSCA Regime in the IFSC

The savings clause in Regulation 15(2) ensures continuity: any action taken under the disapplied SEBI regulations before the commencement date is deemed to have been taken under the corresponding provision of the new Regulations. Ongoing investigations, disclosures already made, and enforcement orders already passed are not disturbed by the transition.

When Does It Apply?

Regulation 1(2) fixes commencement to the date of Gazette publication — there is no separate notified "appointed date" and no phased rollout specified in the text. Entities operating in the IFSC should therefore treat 1 September 2026 as the operative date for all obligations, including the internal-controls requirement under Regulation 9 and the designated-persons disclosure regime under Regulation 6.

Practical Implications for IFSC Entities

Listed entities in the IFSC, and the compliance functions supporting them, face a re-papering exercise rather than a wholesale rethink of controls that were presumably already SEBI-compliant. The immediate work involves:

• Re-drafting insider-trading codes of conduct and disclosure policies to cite the 2026 Regulations rather than the 2015 and 2003 SEBI regulations.
• Reworking designated-persons disclosure trackers to monitor the USD 25,000 per-quarter threshold, rather than any rupee-based figure previously used.
• Reviewing existing trading plans against the 120-day advance-disclosure requirement under Regulation 5(3)(f).
• Checking whether existing information-barrier arrangements for non-individual insiders meet the standard in Regulation 5(3)(e), since the burden of proof sits with the entity if a trade is challenged.
• Confirming that internal controls address all four elements listed in Regulation 9(2) — identification of MNPI, restriction of its communication, identification of employees with access, and periodic control reviews.

Compliance Checklist

Frequently Asked Questions

CorpLawUpdates Analysis

For compliance teams already versed in SEBI's insider trading and PFUTP framework, the conceptual learning curve here is gentle — the categories of prohibited conduct, the idea of a rebuttable presumption, and the trading-plan defence will all feel familiar. The real work is operational: currency conversion for disclosure tracking, re-papering codes of conduct to cite the correct regulation numbers, and confirming that any information barriers between deal teams and trading desks meet the specific evidentiary standard in Regulation 5(3)(e), which places the burden of proof on the entity if challenged.

One area worth monitoring is the numbering inconsistency around the relaxation and savings provisions — both printed as "regulation 15" in the Gazette copy. Practitioners should watch for any corrigendum from IFSCA clarifying the intended numbering, since cross-references in future subsidiary instructions or enforcement orders may depend on it. Another area to watch is how IFSCA uses its power under Regulation 5(4) to specify "additional standards and requirements, including reporting requirements" for the trading-plan and information-barrier defences — this is where the practical compliance burden for institutional insiders is likely to be fleshed out further.

This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Readers should verify the applicable primary regulatory source before taking action.