The International Financial Services Centres Authority (IFSCA / IFSCA Official) under International Financial Services Centres Authority Act, 2019 (“๐๐ ๐๐๐ ๐๐๐ญ, 2019”) has released a circular clarifying the net worth maintenance requirements for Fund Managers as stipulated by the IFSCA (Fund Manager) Regulations, 2022. These regulations provide a detailed framework for a variety of fund management activities within the International Financial Services Centre (IFSC), covering the management of private investment funds, special situations funds, mutual funds, hedge funds, portfolio management services, ETFs, family offices, REITs, and InvITs. The unified fund regime has been previously praised for its forward-thinking approach in establishing IFSC as a leading global financial hub.
According to Regulation 8 of the Fund Manager Regulations, all fund managers are required to maintain a minimum net worth as detailed in the Second Schedule of the Regulations, or as otherwise directed by the Authority. Specifically, the Second Schedule mandates that:
๐๐ฎ๐ญ๐ก๐จ๐ซ๐ข๐ฌ๐๐ ๐
๐ฎ๐ง๐ ๐๐๐ง๐๐ ๐๐ฆ๐๐ง๐ญ ๐๐ง๐ญ๐ข๐ญ๐ข๐๐ฌ (๐
๐๐๐ฌ) ๐ฆ๐ฎ๐ฌ๐ญ ๐ฆ๐๐ข๐ง๐ญ๐๐ข๐ง ๐ ๐ฆ๐ข๐ง๐ข๐ฆ๐ฎ๐ฆ ๐ง๐๐ญ ๐ฐ๐จ๐ซ๐ญ๐ก ๐จ๐ ๐๐๐ 75000;
๐๐๐ ๐ข๐ฌ๐ญ๐๐ซ๐๐ ๐
๐๐๐ฌ (๐๐จ๐ง-๐ซ๐๐ญ๐๐ข๐ฅ) ๐๐ซ๐ ๐ซ๐๐ช๐ฎ๐ข๐ซ๐๐ ๐ญ๐จ ๐ก๐๐ฏ๐ ๐ ๐ฆ๐ข๐ง๐ข๐ฆ๐ฎ๐ฆ ๐ง๐๐ญ ๐ฐ๐จ๐ซ๐ญ๐ก ๐จ๐ ๐๐๐ 500000;
๐๐๐ ๐ข๐ฌ๐ญ๐๐ซ๐๐ ๐
๐๐๐ฌ (๐๐๐ญ๐๐ข๐ฅ) ๐ฆ๐ฎ๐ฌ๐ญ ๐๐ง๐ฌ๐ฎ๐ซ๐ ๐ ๐ฆ๐ข๐ง๐ข๐ฆ๐ฎ๐ฆ ๐ง๐๐ญ ๐ฐ๐จ๐ซ๐ญ๐ก ๐จ๐ ๐๐๐ 1000000.
The newly issued circular by the IFSCA addresses the net worth criteria for fund managers, highlighting that in cases of non-compliance, as outlined in Sections 12 and 13 of the IFSCA Act, 2019, fund managers are prohibited from launching new schemes within the IFSC. They are also advised against taking on new clients or engaging in new business activities until their net worth is restored to the prescribed levels.
In the regulatory sphere, having minimum net worth is one of the important criteria to assess risk reduction mechanisms. SEBI, Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority (PFRDA) also have similar requirements in their regulated mechanisms.
This clarification is a critical directive aimed at ensuring fund managers adhere to global standards and comply with the regulatory requirements set forth. It emphasizes the importance of maintaining sound financial practices and regulatory compliance within the IFSCA’s regulatory framework, reinforcing the commitment to upholding the integrity of the IFSC as a premier global financial centre.
A copy of the circular is attached herewith.