The legal basis
IFSCA exercises the powers of the financial-sector regulators under section 13(1) of the IFSCA Act, read with the Acts in the First Schedule. Section 13(4) applies those Acts' provisions on inspection, investigation, adjudication, settlement and appeals to IFSC entities. Orders typically cite sections 12 and 13(4) of the IFSCA Act with the parent statute (for example sections 11B and 15A to 15HB of the SEBI Act, 1992, or the Insurance Act, 1938) and the activity regulations. Orders against finance companies, including aircraft and ship lessors, are made under regulation 11 of the Finance Company Regulations and section 12 of the IFSCA Act.
IFSCA states that before opening a formal investigation it considers the seriousness of the misconduct, the public interest, the evidence available and intent, and where relevant illegal gains and loss to victims. For the inspection powers and the range of actions, see inspections, enforcement and penalties.
The usual sequence
- Detection. Surprise visits to the GIFT City office, onsite inspections (sometimes by an exchange at IFSCA's direction), scrutiny of filings such as the SEZ commencement intimation, or a complaint.
- Supervisory letters. Advisory letters, warning letters, and in some fund-manager cases a bar on onboarding new investors, before formal proceedings. Several orders record that advisory letters went unanswered, and IFSCA has treated that as an aggravating feature.
- Show-cause notice setting out the allegations and the provisions said to be breached, with the documents relied on. Published orders record reply periods of 14 and 21 days from receipt.
- Reply and hearing. A written reply, then a personal hearing in person or by video conference. Adjournments have been granted, for example on medical grounds, and further written submissions are commonly allowed after the hearing.
- Order. A reasoned order that deals with each allegation, records which are established and which are not, and sets out the outcome.
Where a notice cannot be served, IFSCA has served by affixture at the registered address and by publication on its website, and then proceeded ex parte. Keep the registered address and contact email current.
Interim orders
IFSCA can act before a full hearing where investors need protection. In July 2026, after a fund manager reported that a business email compromise had diverted USD 100,000 of a scheme's investment, IFSCA passed an ex parte ad interim order requiring the amount to be deposited and earmarked, and barring new schemes until it was. The entity could object within 21 days. After a hearing in August 2026, a confirmatory order directed refund to investors within 30 days, while the investigation continued.
Outcomes and what affects them
Published outcomes include advisories, cautions, warnings, directions, monetary penalties and cancellation of registration. Penalties are payable within 45 days, with simple interest at 12 per cent after that. Under section 13(5) of the IFSCA Act they are collected in the foreign-currency equivalent at the exchange rate notified by the RBI on the date of the order.
Factors IFSCA has expressly weighed:
- Remediation before the order. Hiring IFSC-based staff, appointing a principal officer or filing overdue reports has led to warnings or advisories rather than penalties or cancellation, which IFSCA has called disproportionate in such cases.
- Multiplicity and duration of breaches, and failure to respond to IFSCA.
- Whether the breach is technical or venial. IFSCA has rejected that characterisation where conduct rules were involved.
Arguments IFSCA has rejected in published orders include low revenue as a reason for not having a principal officer, financial stress as a reason for not filing reports, and the claim that a successor entity is not answerable for its predecessor's conduct.
Practical considerations
- Time limits. Diarise the reply date on receipt. If more time is needed, ask in writing before it expires.
- Access to records. Ask for every document relied on. In one 2025-26 matter the inspection report was supplied late and the entity was given 10 days to answer it.
- Raise every point at first instance. Jurisdictional and procedural objections, and facts in mitigation, should be in the reply and at the hearing.
- Settlement. Section 13(4)(b) of the IFSCA Act refers to the settlement and compounding provisions of the parent Acts. No published IFSCA order records a settlement, and we have not seen IFSCA settlement regulations. Treat settlement as uncertain.
- Appeal. Check the appeal route the day the order arrives. See challenging regulatory action.