Revised IFSCA Fund Management Regulations, 2022

The 42nd meeting of the IFSCA Official Board was held on December 19, 2024. During the meeting, the Board approved the revised IFSCA (Fund Management) Regulations, 2022. This revision reflects the healthy growth of the Fund Management industry in the International Financial Services Centre (IFSC) and incorporates feedback from market participants. The changes aim to enhance ease of doing business, clarify regulatory provisions, and ensure investor protection.

Key Changes in the Regulations

A. Non-Retail Schemes (Venture Capital and Restricted Schemes)

1. Reduced Minimum Corpus: The minimum corpus requirement has been reduced from USD 5 million to USD 3 million.

2. Extended Validity of PPM: The validity of a scheme’s Private Placement Memorandum (PPM) is now extended to 12 months from the date of IFSCA’s acknowledgment.

3. Flexible Contributions: The FME or its associate can now invest up to 100% in a scheme, subject to the following conditions: The FME or associate and their UBOs must be non-residents of India. The scheme cannot invest more than one-third of its corpus in any single company or its associates.

4. Joint Investments: Joint investments are now allowed for individuals with specific relationships.

5. Streamlined Categorization: The categorization of Alternative Investment Funds (AIFs) and Family Investment Funds (FIFs) has been clarified.

6. Transaction Restrictions: Schemes cannot buy or sell securities to/from associates, other schemes of the FME, or major investors (who have committed at least 50% of the scheme’s corpus) without prior approval from 75% of investors by value. The major investor is excluded from the voting process if the transaction involves them.

7. Independent Valuation Exemption: Fund-of-funds schemes are exempt from independent valuation if the underlying fund has been valued independently.

B. Manpower Requirements for FMEs

1. Simplified Appointment Process: Prior approval from IFSCA for appointing Key Managerial Personnel (KMPs) is no longer required; FMEs only need to notify IFSCA.

2. Additional KMPs for Large AUMs: FMEs managing an AUM of USD 1 billion (excluding fund-of-funds schemes) must appoint an additional KMP.

3. Revised Qualification Requirements: The educational and professional qualifications for KMPs have been streamlined.

4. Mandatory Certifications: Employees must undergo certifications from institutions specified by IFSCA.

C. Registered FMEs (Retail) and Retail Schemes

1. Simplified Track Record Criteria: The track record requirements can now include the experience of the FME’s holding companies or subsidiaries.

2. Reduced Minimum Corpus: The minimum corpus for retail schemes has been reduced from USD 5 million to USD 3 million. Open-ended schemes can commence operations with USD 1 million, provided they achieve the minimum corpus within 12 months.

3. Investment Cap Linked to Index: For sectoral and thematic schemes, the cap on investment in a single company is linked to the company’s weightage in the representative index or 15%, whichever is higher.

4. Flexible Fund-of-Funds Restrictions: Retail scheme restrictions do not apply to fund-of-funds schemes if the underlying funds meet regulatory requirements.

5. Optional Listing: Listing of close-ended retail schemes on recognized stock exchanges is now optional if each investor’s minimum investment is USD 10,000.

D. Other Key Updates

1. Reduced PMS Minimum Investment: The minimum investment for Portfolio Management Services (PMS) has been reduced from USD 150,000 to USD 75,000.

2. Custodian Appointment: FMEs must appoint a custodian registered with IFSCA. Exceptions include: Fund-of-funds schemes, which are exempt from this requirement. Securities issued in foreign jurisdictions, where a regulated custodian in the local jurisdiction can be appointed. A 12-month transition period is provided for schemes needing to appoint a custodian in IFSC.

3. Streamlined “Fit and Proper” Criteria: The criteria for FMEs have been simplified.

4. Flexible Fund Deployment: Pending deployment, funds can now be invested in bank deposits and overnight schemes in addition to existing options.

5. Overseas Branches: FMEs can open overseas branches or representative offices without prior approval, solely for marketing and client service.

6. Integration of Circulars: Relevant circulars issued earlier have been incorporated into the updated regulations.

For Detailed Press Release: 

International Financial Services Centres Authority | Press Release

For Detailed Draft FME Rules: 

International Financial Services Centres Authority | Draft Regulations for Public Comments

Disclaimer: This post is for informational purposes only and does not constitute professional advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information provided. Any reliance is at your own risk. Consult professionals for specific advice.