Crack Grade B 1

IFSCA Regulations Relevant Definitions

 Act means the International Financial Services Centres Authority Act, 2019

 Business combination means a merger or amalgamation or acquisition of shares

or assets of one or more companies having business operations.

 Convertible debt instrument means an instrument which creates or

acknowledges indebtedness and is convertible into equity shares of the issuer at a

later date.

 Convertible securities means securities which are convertible into or

exchangeable with equity shares of the issuer at a later date, with or without the

option of the holder of such securities and includes convertible debt instruments

and convertible preference shares

 Debt securities means non-convertible debt securities which create or

acknowledge indebtedness and includes debentures and bonds

 Designated stock exchange means a recognised stock exchange chosen by the

issuer on which securities of an issuer are listed or proposed to be listed for the

purpose of a particular issue of securities under these regulations.

 A depositary receipt (DR) is a negotiable certificate representing shares in a

foreign company traded on a local stock exchange.

o Depositary receipts allow investors to hold equity shares of foreign

companies without the need to trade directly on a foreign market.

o Depositary receipts are more convenient and less expensive than purchasing

stocks directly in foreign markets.

 "Foreign Jurisdiction" means a country, other than India, whose securities

market regulator is a signatory to International Organization of Securities

Commission‘s Multilateral Memorandum of Understanding (IOSCO's MMOU) or a

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signatory to bilateral Memorandum of Understanding with the IFSCA, and which

is not identified by Financial Action Task Force as:

o A jurisdiction having a strategic Anti-Money Laundering or Combating the

Financing of Terrorism deficiencies to which counter measures apply (Grey

List Countries); or

o A jurisdiction that has not made sufficient progress in addressing the

deficiencies or has not committed to an action plan developed with the

Financial Action Task Force to address the deficiencies (Black List

Countries Eg North Korea)

 Follow-on public offer or FPO means an offer of specified securities by a listed

issuer to the public for subscription and includes an offer for sale of specified

securities to the public by any existing holders of such specified securities in a

listed issuer.

 Green shoe option means an option of allotting specified securities in excess of

the specified shares offered in the public issue as a post-listing price stabilizing

mechanism.

o Extra: A greenshoe option is an over-allotment option in the context of an

IPO.

o A greenshoe option was first used by the Green Shoe Manufacturing

Company

o Allows underwriters to offer more shares to public, results in price stability.

 Information memorandum means any document that provides investors with

certain information about the issuer and the securities in connection with an

application for listing of securities. It Includes:

o Thorough description of the business, its products and services

o Description of the market opportunities, and industry trends

o Risk Factors
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o Management team, skills, and future personal needs

o Competitive analysis, barriers to entry for new competition etc.

 Initial public offer or IPO means an offer of specified securities by an unlisted

issuer to the public for subscription and includes an offer for sale of specified

securities to the public by any existing holders of such specified securities in an

unlisted issuer

 Key managerial personnel means the officers or personnel of the issuer who are

members of its core management team (excluding board of directors) and includes

members of the management one level below the executive directors of the issuer,

functional heads and includes key managerial personnel.

 Lead manager means a merchant banker appointed by the issuer to manage the

issue.

o In the pre-issue process, the Lead Manager (LM) takes up the due diligence

of company's operations.

o They also do drafting and design of Offer documents, Prospectus, statutory

advertisements and memorandum containing salient features of the

Prospectus.

o Examples of Lead managers in India: ICICI Securities Ltd, HDFC Bank

etc

 Listed Company means a company whose specified securities or depository

receipts are listed on a recognised stock exchange(s) in IFSC

 Recognised stock exchange means a stock exchange in an IFSC recognised by

the Authority

 SR equity shares means the equity shares of an issuer having superior voting

rights compared to all other equity shares issued by that issuer.

o Need: Superior voting right shares, which offer a higher dividend than

ordinary shares, do not subscribe to the dictum of one share-one vote. They
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enable founders to retain control of their companies even after new investors

come in.

 Special Purpose Acquisition Company or SPAC means a company which does not

have any operating business and has been formed with the primary objective to

affect a business combination

 "Associate" in relation to a person shall include another person:

o who, directly or indirectly, by himself, or in combination with other persons,

exercises control over the first person;

o who holds control of at least twenty percent of the total voting power of the

first person;

o who is a holding company or a subsidiary company of the first person;

o who is a relative of the first person;

o who is a member of a Hindu Undivided Family wherein the first person is

also a member; or

 "governing board" means the board of directors of a recognised stock exchange, a

recognized clearing corporation or a recognised depository

 "Netting" means the determination by clearing corporation of net payment or

delivery obligations of the clearing members of a clearing corporation by setting off

obligations or claims arising out of buying and selling of securities

 Novation means the act of one or more recognised clearing corporations

interposing between the parties of every trade, so as to be a legal counterparty.

Novation is the replacement of one of the parties in an agreement between two

parties, with the consent of all three parties involved.

 "public interest director" means an independent director representing the

interests of investors in securities market in an IFSC and who is not having any

association, directly or indirectly, which in the opinion of the Authority, is in

conflict with his role recognized.

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o The presence of Public Interest Directors in the Board room dissuades the

ineffective use of resources, fraud, and inequality and the unaccounted

ability of decisions, mismanagement.

 Clearing corporation" means a clearing corporation in an IFSC recognised by the

Authority.

o In order to make certain that transactions run smoothly, clearing

corporations become the buyer to every seller and the seller to every buyer.

o For example, if two investors agree to the terms of a financial transaction,

such as the purchase or sale of a corporate security, a clearing corporation

will act as a middle man, facilitating the purchase on one end and the sale

on the other end of the transaction.

 Recognised market infrastructure institution means a recognised stock exchange,

a recognized clearing corporation or a recognised depository

 Recognised stock exchange means a stock exchange in an IFSC recognised by the

Authority

 "shareholder director" means a director who represents the interest of

shareholders, and elected or nominated by such shareholders

 “Account aggregator” means a person that undertakes the business of providing

the service of retrieving or collecting information of its customer pertaining to

financial assets presenting such information to the customer or any other person

as per the instructions of the customer

 “Banker to an issue” means a bank carrying out banking related activities in an

issue.

o They carry out all the activities of ensuring that the funds are collected and

transferred to the Escrow accounts

 “Control” shall include the right to appoint majority of the directors or to control

the management or policy decisions exercisable by a person or persons acting in

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concert, including by holding interest, whether direct or indirect, to the extent of

more than fifty percent of voting rights or interest

 “Investment adviser” means a person, who for consideration, is engaged in the

business of providing investment advice to clients or other persons or group of

persons and includes any person who holds out himself as an investment adviser,

by whatever name called

 “Investment banker” means a person who is engaged in the business of issue

management either by making arrangements regarding selling, buying or

subscribing to securities or acting as manager, consultant, adviser or rendering

corporate advisory service in relation to such issue management

o Investment banking deals primarily with raising money for companies,

governments, and other entities.

o Investment banking activities include underwriting new debt and equity

securities for all types of corporations.

o Investment bankers work with corporations, governments, and other

groups. They plan and manage the financial aspects of large projects.

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