Govt notifies IFSCA fund management regulations: Lower minimum corpus, extended PPM validity

With a view to improve the ease of business for fund managers, the IFSCA (Fund Management) Regulations, 2025 has been notified by the IFSC Authority.

Key provisions of the regulation include a reduction in minimum corpus from $5 million to $3 million for retail and non-retail schemes, increase in validity of scheme's PPM to 12 months, and certain other measures. Here are the key details of the regulation:

For Non-retail Schemes

1) The minimum corpus of a scheme has been reduced from $5 million to $3 million, which will allow Fund Management Entities (FMEs) to commence investment activities upon reaching a lower threshold.

2) The validity of scheme’s Private Placement Memorandum (PPM) has been increased to 12 months. This will provide more time to FMEs to raise the minimum corpus to start a scheme. Also, open-ended schemes have been permitted to start investment activities upon achieving an investment of $1 million and the minimum corpus of $3 million can be achieved within a 12-month period.

3) The contribution by FME or its associates in a scheme is now permitted to 100 percent, versus 10 percent earlier.

4) Schemes have been restricted from buying or selling securities from associates, other schemes of FME, or a major investor (someone who has committed to invest at least 50 percent of the corpus of the scheme), unless prior approval has been obtained from 75 percent of the investors in the scheme by value. This measure is intended to mitigate transactions which may not be in the best interest of the investors.

5) The Fund of Funds Scheme has also been amended to ensure objectivity. For example, the valuation of a scheme’s assets by an independent service provider is exempted for Fund of Funds schemes if the underlying fund has been valued by an independent service provider. Similarly, the requirement to appoint a custodian in IFSC has been exempted for Fund of Funds schemes, if the underlying fund has appointed a custodian.

For Retail Schemes

1) The minimum corpus has been reduced from $5 million to $3 million, and additional flexibility has been provided to open-ended schemes.

2) Considering the distinct nature of index, sectoral, thematic and fund of funds schemes, prudential norms have been amended to provide necessary operational flexibility.

3) The restrictions in retail scheme such as single company, single sector, and others have been disapplied to Fund of Funds scheme, if the underlying funds satisfy the investment restrictions specified in the FM Regulations, 2025. Similarly, the valuation of scheme’s assets by an independent service provider is exempt for Fund of Funds scheme if the underlying funds have been valued by an independent service provider.

4) The requirement of listing of close-ended retail schemes on recognized stock exchanges has been made optional, if minimum amount of investment by each investor in the scheme is at least $10,000.

For Portfolio Management Services

1) In order to further boost portfolio management activities, the minimum investment amount has been reduced to $75,000 from $150,000.2) Clients under a PMS may transfer their funds into a designated broking account, which may be then managed by the FME under PMS, subject to certain safeguards.