On 10-2-2025, the International Financial Services Centres Authority notified the International Financial Services Centres Authority (Fund Management) Regulations, 2025 repealing the International Financial Services Centres Authority (Fund Management) Regulations, 2022. The provisions came into force on 13-2-2025.
Key Points:
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Registration of Fund Management Entity (‘FME’):
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A certificate of registration, obtained from the International Financial Services Centres Authority (‘IFSCA’) will be necessary if any entity is desirous to undertake business of fund management.
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An application that does not include the required declarations and undertakings can be rejected.
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Registration can be done under the following 3 categories:
✓ Authorised FME:
◆ Money is pooled from accredited investors/ investors investing above specified thresholds by way of private placement and invest in start-ups or early stage ventures though Venture Capital Scheme;
◆ FMEs that are set up by a Single Family to manage its Family Investment Fund for investing in financial products including securities and such other permitted asset classes.
✓ Registered FME (Non retail):
◆ Money is pooled from accredited investors/ investors investing above specified thresholds by way of private placement for investing in financial products including securities, and such other permitted asset classes through one or more restricted schemes;
◆ Can undertake Portfolio Management Services and act as an investment manager for private placement of Investment Trusts;
✓ Registered FME (Retail):
◆ FMEs that pool money from all investors or a section of investors under one or more schemes for investing in financial products including securities, and such other permitted asset classes through retail schemes;
◆ Registered FME can act as investment manager for public offer of Investment Trusts and will also be able to launch Exchange Traded Funds;
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Applicant should have a sound track record and general reputation of fairness and integrity in all business transactions.
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Applicant will have to designate a principal officer who will be responsible for overall activities of FME including fund/ risk management and compliance.
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Terms and conditions of registration:
✓ FME, its CEO / Directors / Designated Partners, Principal officer / KMPs will have to comply with the provisions of these regulations;
✓ FME will forthwith inform IFSCA, of any material change in the information or particulars previously furnished, which have a bearing on the registration granted by the Authority.
✓ FME cannot change its category, except with the prior approval of the Authority.
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Certificate of registration will be valid for a period unless it is suspended by IFSCA or surrendered by FME.
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Scheme for Fund Management:
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Venture Capital Scheme:
✓ Cannot have more than 50 investors;
✓ Investors invest at least USD 250000 and Accredited Investors will be permitted to invest in such schemes;
✓ Schemes can only be close ended;
✓ Placement memorandum should disclose the amount raised and tenure, which should not be less than 3 years;
✓ Minimum size of corpus will be USD 3 million and the total corpus should not exceed USD 200 million;
✓ Can invest in its associates subject to prior approval of 75% of investors in the scheme by value.
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Restricted Schemes (Non- Retail Schemes):
✓ Schemes launched by Registered FMEs for various investment strategies;
✓ These schemes can be launched through private placement by filing the placement memorandum with the Authority along with the applicable fees;
✓ Cannot have more than 1000 investors;
✓ Investors invest at least USD 150,000 and Accredited Investors may invest in such schemes;
✓ Schemes can be open ended or close ended;
✓ In an open-ended scheme, the maximum investment in unlisted securities should not exceed 25% of the corpus of the scheme;
✓ Minimum size of corpus of the restricted schemes shall be USD 3 Million;
✓ A restricted scheme may co-invest in permissible investments.
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Retail Schemes:
✓ These schemes are schemes that may be launched by Registered FMEs (Retail) for pooling money from all investors or a section of investors through an offer document for investment as per its stated investment objective in various permissible investments;
✓ No scheme will be launched unless a draft offer document is filed with the IFSCA along with the applicable fees at least 21 working days before the launch of the scheme;
✓ Should have at least 20 investors with no single investor investing more than 25% in a scheme and will have to ensure compliance with this requirement within a maximum period of 6 months from the closure of the offer;
✓ schemes may be open-ended or close-ended;
✓ tenure of a close-ended scheme cannot be less than 3 years;
✓ The offer document for retail schemes will clearly include all disclosures which are material for investors to make a decision regarding investing in such schemes;
✓ Any material deviation or alteration to the fund strategy should be made with the consent of at least 2/3rd of investors by value.
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Special Situation Funds:
✓ A Registered FME may launch a special situation fund through a private placement memorandum by filing the memorandum with the Authority along with the applicable fees
✓ Can only be a close-ended fund;
✓ The placement memorandum should disclose the tenure which cannot be less than 3 years;
✓ The tenure of a special situation fund may be extended up to 2 years;
✓ A special situation fund can invest only in special situation assets;
✓ A special situation fund shall not borrow or engage in any leveraging activities other than to meet day-to-day operational requirements.
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Environmental, Social and Governance (‘ESG’): FME managing AUM above USD 3 billion as at the close of a financial year or any other threshold of AUM as may be specified by the Authority, will have to:
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establish policy on governance around material sustainability-related risks and opportunities;
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disclose in its annual report how the FME identifies, assesses and manages material sustainability-related risks;
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establish and disclose in its annual report the process of factoring sustainability related risks and opportunities into fund manager’s investment strategies and processes, including, where relevant, data and methodologies used;
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Repeal and Supersedes:
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Supersedes:
✓ IFSCA Circular No. IFSCA-IF-10PR/1/2023-Capital Markets/4 dated 25-7-2024;
✓ IFSCA Circular No. IFSCA-IF-10PR/1/2023-Capital Markets/5 dated 29-10-2024.
