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International Financial Services Centres Authority (Fund Management) Regulations, 2022

 

International Financial Services Centres Authority: Relevance

  • GS 3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

अंतर्राष्ट्रीय वित्तीय सेवा केंद्र प्राधिकरण (निधि प्रबंधन) विनियम, 2022

International Financial Services Centres Authority: Context

  • Recently, International Financial Services Centres Authority (IFSCA), has notified a comprehensive regulatory framework for Investment Funds.

 

International Financial Services Centres Authority (Fund Management) Regulations, 2022_40.1

 

International Financial Services Centres Authority: Salient features

  • Registering the Fund Management Entity: A Fund Management Entity will be registered with IFSCA and will be able to manage different types of funds and schemes subject to meeting the eligibility criteria.
  • Green Channel: Venture Capital Schemes or non-retail schemes soliciting money from accredited investors only shall qualify for a green channel.
    • Under green channel, the schemes filed can open for subscription by investors immediately upon filing with IFSCA.
  • Exchange Traded Funds (ETFs): Considering that ETFs offer a means to gain exposure to specific markets or asset classes at a low cost, registered fund managers in IFSC shall be able to launch not just Index based ETFs but also Active ETFs and Commodity based ETFs.
  • Stressed Assets: Realising the important role of IFSC in the Government initiative of addressing the issue of NPAs faced by banks, a framework has been prescribed for special situation funds to be launched by fund managers in IFSC.
  • Environment Social Governance (ESG): Growing number of investors expect fund managers to make ESG issues integral to their investment strategies. With the intent of making IFSC a hub for a host of activities related to sustainable finance, disclosures have been proposed to be mandated at the entity level and scheme level.
  • Family Office: Globally, there is an increasing need for having a formal structure for managing and preserving the wealth of the High-Net-worth Individuals (HNIs) and Ultra HNIs and their families. Accordingly, a framework to facilitate a self-managed investment fund of a family office has been provided in the regulations.
  • The regulations also provide support for various innovations in a controlled way:
    • Fund Lab: The fund managers may try new strategies in a controlled manner and build a track record for their fund.
    • Special purpose vehicle (SPV) as a co-investment structure and leverage: FME shall be permitted to create SPVs under the main scheme to enable undertaking co-investment or leverage along with the Fund/ scheme subject to certain conditions.
    • Retail participation in private markets: There has been a growing need to facilitate investors at large to invest in private markets. Accordingly, it is proposed to facilitate retail close ended schemes to invest in unlisted securities subject to certain conditions.

 

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