2024 regulatory round-up for funds in GIFT International Financial Services Centre (IFSC)

IFSCA has mandated the maintenance of specified net worth by the fund management entity (FME). To enforce this, FMEs are restricted from launching new schemes in the IFSC, onboarding new clients or undertaking new regulated business activities until its minimum net worth is restored.

(Circular No. F. No. IFSCA-IF-10PR/1/2023-Capital Markets/2 – 16 February 2024)

IFSCA has removed certain difficulties faced by sovereign wealth funds in setting up FMEs and launching schemes in GIFT IFSC by relaxing the requirement to appoint an independent custodian to the schemes. The requirement for an FME to have independent office space has also been relaxed, as long as the FME and trustee of trust scheme(s) share office space and their services are not extended to any third party.

(F. No. IFSCA-IF-10PR/1/2023-Capital Markets/3 – 11 March 2024)

To infuse ease of doing business in GIFT IFSC’s fund management ecosystem, IFSCA has facilitated the launch of schemes through submission of a private placement memorandum (PPM) and has outlined disclosure and requirements to be made therein. IFSCA has now introduced a web portal, Single Window IT System (SWITS), for the filing of scheme documents.

The key points to note are:

• Minimum disclosures for the PPM have been specified by IFSCA for all schemes other than retail schemes
• Schemes may be launched upon filing of the PPM with IFSCA (upon the IFSCA taking the PPM of the scheme on record under the IFSCA (Fund Management) Regulations, 2025)
• The authorised person of the FME must give a declaration that all relevant disclosures material to the scheme have been disclosed in the PPM
• A disclaimer must be included in the PPM clarifying that the IFSCA has not reviewed or approved the PPM
• The validity of the PPM may be extended beyond six months upon refiling (this has now been changed to 12 months under the IFSCA (Fund Management) Regulations, 2025)

(F. No. IFSCA-AIF/32/2024-Capital Markets – 5 April 2024)

IFSCA has implemented measures to facilitate investments by non-resident Indians (NRIs) and overseas citizens of India (OCIs) into Indian securities through schemes or funds in IFSCs.

These initiatives include two alternative routes specified for NRIs/OCIs to contribute up to 100% in the corpus of IFSC-based schemes or funds registered as foreign portfolio investments (FPIs):

• Route 1 requires, among other things, submission of the permanent account number (PAN) of all investors along with their economic interests to the Department of Defence Production (DDP)
• Route 2 permits investment without submission of the documents specified for Route 1, subject to eligibility conditions as specified by the Securities and Exchange Board of India (SEBI) on pooling, pro-rata and pari-passu rights, diversification, broad-basing and independent management

(F. No. IFSCA-IF-10PR/2/2024-Capital Markets – 2 May 2024)

In addition to independent third-party service providers, IFSCA has now empowered registered credit rating agencies to undertake valuation of assets of the schemes under IFSCA (Fund Management) Regulations, 2022. This has now been incorporated in IFSCA (Fund Management) Regulations, 2025.

(F. No. IFSCA-IF-10PR/1/2023-Capital Markets/4 – 25 July 2024)

With an objective to develop the ecosystem for retail schemes in GIFT IFSC, and to remove difficulties in the application of regulation 47 of the IFSCA (Fund Management) Regulations, 2022 in relation to fund-of-funds schemes, IFSCA has removed the related investment ceiling/limit.

(F. No. IFSCA-IF-10PR/1/2023-Capital Markets/5 – 29 October 2024)

IFSCA has established a comprehensive framework for complaint handling and grievance redressal by regulated entities within GIFT IFSC. This framework aims to ensure fair, transparent and timely resolution of consumer grievances, thereby enhancing investor confidence and promoting a robust financial ecosystem.

Key components of the framework:

• Complaint handling policy

Each regulated entity is required to develop and implement a policy for handling complaints and grievance redressal. This policy must be approved by the entity’s governing body or board of directors and should outline mechanisms for receiving, processing and resolving complaints effectively.

• Procedure and timelines

The policy should detail the procedures for complaint handling, including specific timelines for acknowledging and resolving complaints. This ensures that consumers receive prompt attention to their grievances.

• Appeal mechanism

An appeal mechanism must be in place for consumers dissatisfied with the initial resolution. This provides an additional layer of recourse, ensuring grievances are addressed thoroughly.

• Reporting and disclosure

Regulated entities are mandated to maintain records of complaints and disclose relevant information on their websites and in annual reports. This promotes transparency and allows consumers to access information about the complaint handling process.

• Online complaint system

Entities are encouraged to establish online systems for complaint submission and tracking, facilitating easier access for consumers to lodge and monitor the status of their complaints.

• Implementation timeline

IFSCA had initially set a deadline of 15 January 2025 for regulated entities to align their complaint handling procedures with the new framework. However, recognising operational challenges, the IFSCA extended this deadline to 15 April 2025 to provide entities with sufficient time for implementation.

(F. No. IFSCA-LPRA/3/2024-Legal and Regulatory Affairs – 2 December 2024)

IFSCA has introduced a mechanism for seeking clarity and guidance on various issues pertaining to potential business activity and transactions and to provide clarity and guidance on the regulatory framework. In response to requests for clarity on whether a proposed activity / business / transaction is compliant with applicable laws, IFSCA may issue no-action letters (recommending against the proposed action), or interpretative letters (adding to the interpretative literature on the relevant provisions).

(F. No. IFSCA-LPRA/11/2024-Legal and Regulatory Affairs – 2 December 2024)