IFSC (Fund Management ) Regulation 2025

The IFSCA (Fund Management) Regulations have been notified on February 19, 2025. The New Regulations 2025 replace the IFSCA (Fund Management) Regulations, 2022.

The prominent changes are as follows

·?????Validity of the placement memorandum for the launch of the scheme is increased from 6 months to 12 months (a further 6-month extension can be given on paying a 50% additional fee)

·??????Valuation of the schemes' assets: new regulation specifically included Credit Rating Agency registered with the SEBI for the purpose of valuation of scheme assets (earlier it was only valuer registered with the Insolvency and Bankruptcy Board of India).

· The Principal Officer and the KMPs shall have prescribed professional qualifications with a minimum duration of one year( earlier, it was two years). The qualification has been broadened to include CFA or FRM. It is further provided that if the principal officer has at least 15 years of work experience in specified activities related to fund management, the minimum educational qualification required for such a person shall be a graduate degree in any field.

·?????Work experience in additional areas like credit rating agencies, market infrastructure institutions, financial sector regulators or consultancy experience and in areas related to fund management, such as deal due diligence, transaction advisory, or similar activities are included

·??????The Compliance Officer experience shall be required for a minimum period of 3 years instead of 5 years if the Compliance Officer possesses a professional qualification and has experience in compliance or risk management in a listed company or an entity regulated by a financial sector regulator.

·??????The Custodian appointed under this regulation shall be based in IFSC unless the local laws of the jurisdiction where the securities have been issued mandate the appointment of a custodian in that jurisdiction

·??????The minimum size of the corpus of the schemes shall be USD 3 million(earlier USD 5 million). Further, it has been added that an open-ended scheme may commence investment activities upon raising at least USD 1 Million in funds and shall achieve the minimum corpus of USD 3 Million (earlier it was USD 5 million) within 12 months from the date of communication from the Authority that the placement memorandum of the scheme has been taken on record

·??????Any Fund Management Entity (FME) that is managing an AUM of at least USD 1 billion, excluding the AUM of fund of funds schemes, as at the close of a financial year shall, in addition to the principal officer and compliance officer, appoint an additional KMP, who shall be assigned with the responsibility of fund management.

·??????The requirement of a maximum investment of 25% in unlisted securities, shall not be applicable if such open open-ended scheme is investing in another open-ended scheme (s) which shall not have an investment in unlisted securities over 25% of their corpus

·??????Restricted schemes and Venture Capital Schemes (RPTs) shall not buy or sell securities from associates, other schemes of the FME or its associates, or an investor who has committed to invest at least 50% of the corpus of the schemes unless prior approval has been obtained from 75% investors in the scheme by value

·??????The ceiling of 10%( by FMEs or its associates) of the target corpus, shall not apply if the following conditions are satisfied a) The FME and its associate investing in the scheme, are persons resident outside India and do not have any person resident in India as their ultimate beneficial owners, and b) Not more than one-third of the corpus of the scheme is invested in an Investee Company and its associates

·??????An FME may accept investments in a scheme from multiple investors acting together as joint investors, provided the investor shall invest at least the minimum applicable investment amount (i.e., USD 250,000 in case of Venture Capital Schemes and USD 150,000 in case of Restricted Schemes). In case the joint investment is with either spouse or parent or son/daughter, the minimum applicable investment amount may be met jointly.

·??????A close-ended retail scheme in which the minimum amount of investment by an investor is less than USD 10,000 shall be mandatorily listed on at least one of the recognized stock exchanges

·?????The restriction of 15% in unlisted securities of open-ended schemes ?shall not apply in case of investment in unlisted securities issued by an investment fund which is open-ended in nature, regulated by the concerned regulatory authority in its home jurisdiction, and is permitted for offering to retail investors in its home jurisdiction

·??????The minimum amount of investment by an investor in case of close-ended schemes investing more than 15% in unlisted securities, shall be USD 10,000. This criteria is not applicable if a close-ended scheme invests in ?unlisted securities issued by an investment fund that is regulated by the concerned regulatory authority in its home jurisdiction

· An FME shall not accept from the client, funds or securities worth less than USD 75,000 (earlier it was USD 150,000) in case of a portfolio management agreement

·??????The bank account for the Funds of the Client availing PMS services can now also be maintained at a specific account of the client maintained with a regulated broker-dealer in IFSC, or an equivalent entity in India or a foreign jurisdiction