The Stockal controversy has raised questions about the safeguards available to Indian residents investing in overseas stocks through global investment platforms, particularly who holds their securities and how client assets are protected against operational failures or unauthorised transactions.
Against this backdrop, investing in overseas stocks through the GIFT City route could offer Indian investors a more regulated channel to access global markets. Separately, making independent Indian or IFSC-based custody of overseas securities mandatory could provide an additional layer of protection, experts said.
The International Financial Services Centres Authority (IFSCA) regulates Global Access Providers (GAPs), which facilitate investments in overseas securities. GAPs must obtain IFSCA authorisation, maintain a minimum net worth of $500,000 ($200,000 for entities undertaking only proprietary global access activities), and comply with risk-management, KYC, anti-money laundering and counter-terrorist financing requirements.
Client funds must be routed through an IFSC Banking Unit or an IFSCA-authorised Payment Service Provider and kept separate from proprietary funds. GAPs must disclose custody arrangements, fees and trading-related risks at onboarding, maintain transaction data within the IFSC, submit quarterly reports and undergo regulatory inspections as well as applicable annual compliance and cybersecurity audits. Risk disclosures are mandatory at every login, while access to crypto-linked and FEMA-prohibited products is barred.
Despite these safeguards, the framework does not require overseas securities to be held with Indian or IFSC-based custodians. Depending on the operating arrangement, securities may be held with foreign brokers, custodians or other intermediaries. An insolvency or operational failure involving an overseas intermediary could expose investors to losses.