The proposals can be broadly classified into three categories: 1) Proposals aimed at enhancing Ease of Doing Business (EoDB), 2) Proposals aimed at introducing additional safeguards, and 3) Proposals aimed to provide Clarifications.
The key proposals from the latest consultation paper are mentioned below.
I) Broadening the eligibility criteria for Key Managerial Personnel (KMPs) by reducing the minimum postgraduate diploma duration from two years to one year and including certifications like CFA and FRM.
II) Extending the validity of placement memorandums for Venture Capital Schemes and Restricted Schemes from six months to twelve months, providing Fund Management Entities (FMEs) more time for operational setup and investor outreach.
III) Allowing temporary parking of funds in bank deposits pending deployment, providing FMEs with more flexibility in managing their funds.
IV) Reducing the minimum size of the corpus for Venture Capital Schemes from USD 5 million to USD 3 million and for Retail Schemes from USD 5 million to USD 3 million, making it easier for smaller schemes to be launched in the IFSC.
V) Providing exemptions for fund of funds schemes from the requirement to have assets valued by an independent third-party service provider if the underlying schemes are already valued by such a provider.
VI) Relaxing the contribution requirements for FMEs/associates in certain Venture Capital and Restricted Schemes, allowing for higher contributions in specific cases where the risk of round-tripping is mitigated.
VII) Rationalizing the minimum investment threshold for Portfolio Management Services (PMS) from USD 150,000 to USD 75,000, making PMS in the IFSC more accessible to a wider range of investors.
VIII) Enabling portfolio managers to manage client funds/portfolios maintained with a broker-dealer, providing more flexibility in managing client assets.
IX) Allowing FMEs to appoint custodians outside the IFSC in cases where local laws of the jurisdiction where securities are issued do not permit the appointment of custodians based in the IFSC.
X) Facilitating the creation of additional investment vehicles for Family Investment Funds, allowing FIFs to pursue different strategies or segregate investments under different legal entities.
XI) Introducing timelines for NAV and portfolio disclosures, requiring monthly NAV disclosures for open-ended schemes within 15 days from the end of the month and half-yearly disclosures for close-ended schemes within 30 days from the end of the half-year.
XII) Mandating a comprehensive risk management framework for FMEs employing leverage, ensuring adequate risk management practices are in place.
XIII) Preventing inter-scheme transfers or transfers of securities with the FME/its associates or major investors in schemes without prior approval from 75% of investors by value, safeguarding the interests of investors.
XIV) Requiring the Principal Officer and other KMPs to be based out of the IFSC, ensuring effective oversight and management of FMEs.
These specific proposals aim to create a more favorable regulatory environment for fund management activities in the IFSC, promoting ease of doing business while maintaining investor protection and market integrity. They reflect IFSCA's commitment to developing GIFT City as a globally competitive fund management hub.
Access the consultation paper - Click HERE
Comments and suggestions from the public are invited on the amendments proposed to IFSCA (Fund Management) Regulations, 2022. Comments may be sent by email to Mr. Aditya Sarda, Deputy General Manager, IFSCA at aditya.sarda@ifsca.gov.in with a copy to Mr. Pavan Shah, General Manager, IFSCA at pavan.shah@ifsca.gov.in latest by August 26, 2024.
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