The International Financial Services Centres Authority (IFSCA / IFSCA Official) under International Financial Services Centres Authority Act, 2019 (“𝐈𝐅𝐒𝐂𝐀 𝐀𝐜𝐭, 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:
𝐀𝐮𝐭𝐡𝐨𝐫𝐢𝐬𝐞𝐝 𝐅𝐮𝐧𝐝 𝐌𝐚𝐧𝐚𝐠𝐞𝐦𝐞𝐧𝐭 𝐄𝐧𝐭𝐢𝐭𝐢𝐞𝐬 (𝐅𝐌𝐄𝐬) 𝐦𝐮𝐬𝐭 𝐦𝐚𝐢𝐧𝐭𝐚𝐢𝐧 𝐚 𝐦𝐢𝐧𝐢𝐦𝐮𝐦 𝐧𝐞𝐭 𝐰𝐨𝐫𝐭𝐡 𝐨𝐟 𝐔𝐒𝐃 75000;
𝐑𝐞𝐠𝐢𝐬𝐭𝐞𝐫𝐞𝐝 𝐅𝐌𝐄𝐬 (𝐍𝐨𝐧-𝐫𝐞𝐭𝐚𝐢𝐥) 𝐚𝐫𝐞 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐭𝐨 𝐡𝐚𝐯𝐞 𝐚 𝐦𝐢𝐧𝐢𝐦𝐮𝐦 𝐧𝐞𝐭 𝐰𝐨𝐫𝐭𝐡 𝐨𝐟 𝐔𝐒𝐃 500000;
𝐑𝐞𝐠𝐢𝐬𝐭𝐞𝐫𝐞𝐝 𝐅𝐌𝐄𝐬 (𝐑𝐞𝐭𝐚𝐢𝐥) 𝐦𝐮𝐬𝐭 𝐞𝐧𝐬𝐮𝐫𝐞 𝐚 𝐦𝐢𝐧𝐢𝐦𝐮𝐦 𝐧𝐞𝐭 𝐰𝐨𝐫𝐭𝐡 𝐨𝐟 𝐔𝐒𝐃 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.