Public Comments on Consultation Paper on Review of IFSCA (Fund Management) Regulations, 2022

Public Comments on Consultation Paper on Review of IFSCA (Fund Management) Regulations, 2022 The Consultation Paper seeking comments/suggestions from the public on review of IFSCA (Fund Management) Regulations, 2022 was issued by IFSCA on August 05, 2024. The following comments/suggestions were received: S. No Regulati Comments/ Suggestions/ Proposed Detailed Rationale Other supporting information on No. amendment 1 132 Explanation. – We, <Name of FME>, a registered fund The Custodian appointed under this regulation management entity(non-retail) had launched 2 shall be based in an IFSC, unless the local laws outbound investment schemes and our target of the jurisdiction where the securities have been geography is East Asian Markets. issued do not permit the same, in which case, notwithstanding anything contained in this At the time of filing our scheme registration regulation the FME may appoint a custodian in application, we had discussed with IFSCA authority the jurisdiction where securities have been that since none of the IFSCA registered custodian issued and such custodian is regulated by the are providing custodian services in our target financial sector regulator of that jurisdiction. markets, we will be appointing an overseas custodian based out of the jurisdiction where securities are issued. IFSCA agreed on the same and registered our schemes. Subsequently, we have Onboarded a Hong Kong based bank as our custodian, which is offering services for those regions. As on June 30, 2024, we have invested USD 56.38 Million into East Asian Markets cumulatively under both our schemes. It is pertinent to note that till date none of GIFT based service providers are offering custody services for East Asian markets. 2 3(4)(a) FIF can have either Fund alone or FME + Fund, Better clarity is what we understand from this clarification. Suggestion : A FIF investing directly or througha FME setup by a single family, to create or manage …….. 3 7 (1) Since AUM is based on valuation of the underlying assets, this may fluctuate – so what happens if the valuation comes down the next financial year? Are they required to continue with the Principal Officer or not?. It is suggested that if the AUM does not meet the threshold prescribed for continuous period of 3 years, this requirement can be relaxed. Finalization of valuation and AUM ascertainment would be known only after 2 months of the close of the financial year. So technically there would be only 1 month to appoint KMP. Hence it is suggested that 6 months period be given for appointment of additional KMP. 4 24 (2) within 30 days from the end of any one of the It may be noted that for Category I half-year ending September or March, as the and II AIFs, SEBI AIF Regulations case may be. allow reporting within 180 days from the end of the year and for Whether one half year is chosen, can there be a Category III AIFs, the same is to flexibility to change the half year. be done on quarterly basis within ________________________________ 60 days from the end of the quarter. Reg 24 (3) provides the following timeline: (3) The aforesaid disclosures shall be made It may be clarified that the within one (1) month of the end of each financial disclosures to investors by VC year. Schemes may be made by FMEs within 210 days from the end of Clarity on requirement for Reg 24(3) to be given. financial year. 5 26 (2) Credit Rating Agencies have already been 38 (2) allowed to value the assets vide circular dated 25/07/2024. The same has to be included6 “accreditation agency” means an entity permitted by the Authority to undertake the activity of accrediting accredited investors. Explanation.- For the purpose of accreditation, the Authority may specify the eligibility criteria for an accreditation agency and also the process for accreditation by such agency; This definition is not used in the regulations 7 Materiality. There are so many places, the word material is used. There is no guidance for the same. The regulations may provide for the FMEs to adopt a materiality policy for various purposes given in the regulation 8 65(5) Physical verification of gold underlying the Gold ETF units shall be carried out by an independent agency capable of undertaking such activities and reported to the Board of FME and fiduciaries on half yearly basis. By when should this be submitted? 9 66(5) Physical verification of silver underlying the Silver ETF units shall be carried out by an independent agency capable of undertaking such activities and reported to the Board of FME and fiduciaries on half yearly basis. By when should this be submitted? 10 79 The portfolio accounts managed and administered by the FME in its capacity as a portfolio manager shall be audited annually and a copy of the certificate shall be given to the client. A) Audited by whom?B) When the certificate has to be given? 11 a) “At all times” is used in multiple places. How do we ensure that the same is complied with? b) Similarly the words “yearly basis” is used without mentioning the time limit for compliance c) Roles and responsibilities - across the document spelling is incorrect. 12 Registered Valuers in Ancillary Service Framework 1. Absence of a Specific Category for Valuers under Ancillary Service Providers: • The current Ancillary Service Provider framework does not include a separate category for valuers, leading to ambiguity regarding their services in GIFT. • Consequently there's a need to create a new category specifically for valuers within the framework. 2. Interim Solution for Valuers: • Until a separate category is created, it's suggested to include valuers under the "Management Consultancy" category, as it is the closest fit. 3. Restrictions on Registered Valuers (RVs): a. Registered valuers, as per extant IBBI regulations, can certify either in their individual capacity or through a Registered Valuer Entity (RVE). b. The absence of a RVE in GIFT City restricts entities based in GIFT from rendering valuation services. c. Consequently the mode of invoicing by an IFSC entity for RV services in GIFT needs clarity. 4. Impact on certified RVs who are part of IFSC unit: a. Individual RVs associated with an IFSC entity can certify only in their individual capacity, which means they cannot invoice under the IFSC entity.5. Recommendation regarding valuation: a. In order to be aligned with the IFSC framework and to ensure quality of valuation services, it is suggested that only branches of RVEs should be allowed to issue certificates in the IFSC. 13 If the tenure of employee CS is likely to be reduced, then compliance has to be tightened through an Annual certification of compliance by a Practicing CS, preferably based out of GIFT. Note on Challenges for Company Secretaries: • Similar to Registered valuers, Company Secretaries (CS) face restrictions under the ICSI guidelines, which allow certification only by CS who are individuals, LLPs or firms. • However in the case of IFSC units, approvals are not being granted for branches of firms. Rather, it is insisted that such entities be formed either as a branch of a company. • In this scenario, CS can certify only through their firm in mainland and not through the IFSC unit. • This limitation discourages Company Secretaries from setting up operations in GIFT City, as they can render the same services from the mainland without these restrictions. 14 Approval route mechanism may be provided in addition to the green channel mechanism. FMEs be provided with the option to choose either of the mechanisms. 15 7(3) FME may be exempted from additional KMP, if In Feeder Funds, active fund management occurs the funds are feeder funds. at the Master Fund level. Meanwhile, the designated fund manager is responsible for selecting the underlying funds, as well as continuously monitoring and deploying the capital.16 7 (3) The KMP of the FME shall be excluded from the Considering the stringent qualification and having requirement of certification(s) from such expertise knowledge and experience, the Principal institution(s) as may be specified by the Officer, Compliance Officer and Fund Manager will Authority. be excluded from the requirement of certification(s) from such institution(s) as may be specified by the Authority. 17 7(4) Inclusion of wider array of institutions Wider inclusion could attract a broader pool of (recognised stock exchange/regulator, etc.) qualified professionals, thereby enhancing the issuing certifications should be done for Key attractiveness and competitiveness of the IFSC. Managerial Personnel (KMP) to manage funds This approach should be balanced to ensure it does operating within IFSCA. not compromise the quality of fund management. 18 7(4) Number of years experience criteria should be Recently, SEBI has replaced relevant number of removed for all KMPs appointed under the FME years’ experience with the certification requirement Regulations for key investment team in SEBI (Alternative Investment Funds) Regulations, 2012. In this consultation paper, it is envisaged that the KMPs of FME are required to undergo certification requirement. Therefore, it is proposed that the criteria of relevant number of years’ experience may be removed. The certification can have a validity period, necessitating renewal to ensure KMPs possess specialized and up-to-date knowledge.19 7 (4) (a) We would like to submit that the language of the Ease of Doing Business proposed amendment may be modified as below. (a) A professional qualification or post- graduate degree or post graduate diploma (minimum two years one year in duration) in finance, law, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university which is recognized by University Grants Commission or by any other commission/ council/ board/body established under an Act of Parliament in India for the purpose or an institute/association affiliated with such university or an institution recognized/established by the Central Government or any State Government or autonomous institute falling under administrative control of Government of India or a recognised foreign university or institution or association or a CFA or a FRM from Global Association of Risk Professionals; or any other qualifications may be specified by the Authority and20 7(4) (b) The exception of 3 years of experience Ease of Doing Business requirement for Compliance Officer should be extended to all candidates having professional qualification. We would like to submit that the language of the proposed amendment in the proviso should be modified as below. Provided that for the KMP provided under sub- regulation (2), the experience as provided above shall be required for a minimum period of 3 years if such KMP is a member of Institute of Company Secretaries of India is a member Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Institute of Cost Accountants of India or Bachelor of Laws (LLB) from a university or an institution recognised by the Central Government or any State Government or any institution equivalent thereto in a foreign jurisdiction or any institution equivalent thereto in a foreign jurisdiction and has experience in compliance or risk management in an entity regulated by a financial sector regulator or a listed company. 21 7(4)(b) It is proposed to waive off the requirement of The requirement for minimum experience which minimum experience. forms part of the current FME Regulations is similar to the provisions to SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). SEBI had vide its Gazette notification dated June 15, 2023 deleted the provisions of the requirement for minimum experience. Further, SEBI vide its consultation paper dated August 6, 2024 for Investment Adviser and Research Analyst has proposed to remove the requirement for minimum experience for the key personnel. In this regard, the rationale provided in the aforesaid consultation papers is as follows: "The requirement of having minimum experience for Principal Officer and other KMPs (Personnel) mayact as a barrier for new age/ first generation Personnel who may not have requisite experience to satisfy the regulatory requirement but have new models to carry out fund management and related activities to generate returns for the investors. Incidentally, no specific experience requirements have been prescribed under the SEBI (Mutual Funds) Regulations, 1996 for directors and key personnel of a mutual fund/Asset Management Company even though there is retail investor participation. With respect to Investment Adviser Regulations, the proposed certification requirements under Regulation 7(5) for the employees of FMEs in IFSC shall ensure that such employees possess relevant knowledge and skills desired to provide their services". In view of the above, it is proposed to dispense with the experience requirements for registration of FME." 22 7 (5) 1. The certification requirements should not be Certification Requirement should be made applicable for all employees of the FME. The applicable for specific roles/ KMPs of the FME as requirement of undergoing specified there can be employees appointed for back office/ certifications should be applicable only to admin functions who are not directly involved in fund specific KMPs of the FME. related activities. 2. KMPs/ Employees of the FME with Further, exemption should be provided to those who professional qualifications (as defined in the already have professional qualifications as they explanation of the regulation) should be exempt would already be subject matter expert or have from the requirement of undergoing certification. practical experience of the same.23 7 The requirement to take prior approval from 1) The regulations already mandate Fit and Proper IFSCA regarding appointment of KMP is requirement, educational qualification and proposed to be done away with. experience for the KMP and also provides a code of conduct for them. 2) The FME itself will check and satisfy the requirement of qualification and experience and intimate to the authority along with Biodata and FME certification to comply the requirement of KMP within 15 working days of appointment/change of the KMP. 24 7(7) Instead of a prior approval, the FME may be There is no such requirement to obtain prior advised to submit a declaration along with an approval under the relevant SEBI regulations for the affidavit from the relevant KMP confirming appointment of KMP. compliance with fit and proper standards, educational qualification and relevant experience. 25 24(2) The below statement seems to contain a discrepancy regarding the timing of disclosures : The FME shall ensure that the portfolio under the scheme and Net Asset Value (NAV) is disclosed to the investors at least on a yearly basis within 30 days from the end of half-year". It should be 30 days from the end of financial year or something similar. 26 24 (2) In case of half yearly disclosure, we suggest to The statement can be confusing in order to rephrase the provision as "The FME shall ensure determine whether the portfolio has to be disclosed that the portfolio under the scheme and Net on annual basis or half yearly. Asset Value is disclosed to the investors on half- yearly basis within 30 days from the end of half- year.27 31(1), The IFSC Fund Management Regulations These grey areas can become a matter of concern 31(2) explains the structure of the fund to be launched at a later date if LOR is not issued by IFSCA. under Category I, II, III in one liner. The regulation is interpreted differently by different experts. In the absence of approval of PPM by IFSCA, there is a risk of adverse comments from IFSCA during inspection at a later date which would be a point of concern for both Investors and FME. Category II AIF is defined as the fund which does not qualify under Category I and III. Category III is defined as the fund which uses complex structure to invest in listed and unlisted securities. Cat III can be both open-ended or close-ended. Can Category II fund invest in Units of Master Fund or Participating shares of Feeder Fund under Master Feeder Structure. Here the units / share are unlisted? 28 31(2) The option of one time extension by IFSCA up to This option will enable the funds who faces genuine 12 months to the time line for declaring the first challenges to represent to the IFSCA for extension close should be considered based on the with nominal fee as against full fee. request of the FME on payment of nominal fee. 29 31 (1) & The said provisions require that the FME shall Currently, for the Fund setup cost (which has to be 43 (1) launch any scheme after a draft offer document borne by FMEs or Investors) 50% component is in is filed with the Authority along with the relation to IFSCA scheme application fees. applicable application fees. Currently, as per IFSCA circular on Fees, or The Regulatory fees for launch of Schemes is on Restricted schemes fees is USD 22,500 and for higher side, this is impacting the launch of multiple Retail schemes fees is USD 22,500. funds and is increasing the burden on the investors. Reduction in IFSCA Fund Application Fees: Considering one of the objectives to set up IFSC in We would like to submit that the scheme launch India was to be cost efficient, there is a need to fees are on higher side. reduce the cost of set up including operation cost of the Funds and FMEs, the reduction in regulatory We would like to submit that the Regulatory fees may be re-considered. approval fees in other comparable jurisdictions like Singapore and Mauritius are in the range of USD 8,000- USD 10,000.Thus, we would suggest in light of objective of reduction of cost of compliance, IFSCA may re- consider the scheme application fees. 30 31 (2) The timeline of 21 working days (after receipt of There should be an outer timeline for providing application in the specified format) for providing comments to the FME by the Authority. comments on the Fund Documents by the Further, Global Institutional Investors usually prefer Authority should be retained. Fund documents which are approved by the Local Authority prior to making any investment decisions. 31 31 (2) & 1. The requirement of re-submission of Ease of Doing Business 43 placement memorandum and payment of full fees should be relaxed. Instead of payment of full fees for such already approved schemes, IFSCA may specify a nominal fees payment (i.e. USD 500). 2. Under Regulation 43, there should be a similar provision of providing extension if minimum size is not achieved. 32 32(2) The requirement to invest minimum applicable The third proviso of the sub regulation states the investment amount for each investor acting following: together as joint investors should not be "Provided further that a FME may accept mandatory. investments in a Restricted scheme from multiple investors acting together as joint investors, wherein each such investor shall invest at least the minimum applicable investment amount." The fourth proviso of the sub regulation states the following: "Provided further that the following individuals, not more than 2, when act as joint investor, the aggregate investment by such individuals shall be at least USD 150,000: (i) An investor and his/her spouse (ii) An investor and his/her parent (iii) An investor and his/her daughter/son" A combined reading of the aforesaid provisions creates an ambiguity on the requirement of the jointinvestor to invest in the scheme. Since the rationale for permitting joint investments in the aforesaid relationships is to enable and attract more investors the requirement of each joint investor investing the minimum applicable amount should not be made mandatory. Either of the investor (from the aforesaid relationship) should be able to make the investment from his/her bank account. 33 32 (2) Contribution of at least 150000 $ should be Gross remittance by investor should be 150000 $ subject to adjustments for remittance charges, subject to certain business/transaction related stamp duty and set-fees/cost adjustment, good to provide this clarity 34 34 (g) Derivatives including commodity derivatives, The IFSCA had permitted IFSC Banking Units and Offshore Derivative Instruments (ODIs) subject non-bank entities, registered with SEBI as FPIs, to to suitable disclosures in the placement issue Derivative Instruments with Indian securities memorandum. Provided that pending as underlying, in GIFT-IFSC. deployment of money, FME may invest money in certificates of deposit, units of investment or The same is now requested for clarification, with a Mutual Fund schemes such as overnight or liquid view of Ease of Doing Business for FMEs registered or money market schemes, money market with IFSCA. instruments, bank deposits or any other securities or financial assets or instruments as The same is now requested for clarification with a may be specified by the Authority view of Ease of Doing Business for FMEs registered with IFSCA. 35 22(1), Prior to deployment... should also cover Clarity may be given for pre-allotment situations 34(1), instances where the application money from the 46(1) investor/s has come but pending allotment of units. Such funds needs to be temporarily invested till units are allotted to investors and funds deployed by the fund manager 36 35 All the Investment restrictions, for non-retail The FME shall have to adhere all the investment scheme shall be adhered/monitored at the time restrictions and limits at the time of making of making investment. investment and not on Mark to Market (MTM). The same is now requested for clarification with a view of Ease of Doing Business for FMEs registered with IFSCA.37 35(2) The minimum corpus for the open ended This will enable the open ended scheme to make restricted scheme can be reduced to USD 1 deployment on reaching the USD 1 million corpus million with the provision of reaching USD 3 and then it can create its track record for raising million within period of 12 months from the further commitment from the investors. closing of initial offer period. 38 35(4) We understand that intention of the IFSCA that We understand that intention of the IFSCA that the the Restricted schemes shall not buy or sell Restricted schemes shall not buy or sell securities securities from associates, other schemes of the from associates, other schemes of the FME or its FME or its associates. (i.e. inter scheme transfer associates. (i.e. inter scheme transfer of securities). of securities). This will not cover investment in the other This will not cover investment in the other schemes schemes of FME and associates (i.e. buying and of FME and associates (i.e. buying and selling the selling the units of the schemes of the FME or units of the schemes of the FME or associates). associates). Such investment should not trigger Such investment should not trigger approval of the approval of the unit holders. unit holders. 39 35 (2) & We agree the changes proposed for Closed- The Funds launched have to wait for deployment/ 47 (6) ended schemes. investment into eligible securities till minimum size We have following suggestions for Open-ended of the Fund is achieved. This may result in schemes. Request IFSCA to consider any of the opportunity loss and time loss for the Investors/ below suggested alternatives - FME. Further, if we look at global practices such as in Alternative 1- Removal of condition of minimum Singapore and Mauritius there is no concept of size for Open-ended schemes: Minimum size of the Fund. The Authority thus We would like to submit that minimum size of the should align with this global practices. Scheme requirement can be removed for Open- ended schemes. This is considering the Global practices wherein no minimum size of the scheme is been prescribed. Alternative 2- Relaxation for Open-ended schemes launched by FMEs: FME should be allowed to launch the restricted schemes once the first investment commitment (i.e. USD 150,000) is received by the scheme. Further, there may be a requirement to bring minimum size of the restricted schemes to USD 3 million within 1 year from launch date of the scheme.In case, the minimum fund corpus is not received within 1 year from launch date of the scheme, then the Authority may consider granting extension on case-to-case basis subject to payment of specified fees. 40 35(4), 47 Associates should not cover the other schemes Such other schemes are professionally managed (5), managed by FME or its group entities. Otherwise for 3rd party investors. FME or its associate are not this would contradict with FoF structure the beneficiary of the corpus 41 35(4) An exemption may be carved out for If the scheme document of Restricted Scheme has investments in the schemes of associates already disclosed such investment in the scheme of without obtaining separate consent from associates, by investing in the Restricted scheme, investors provided the Restricted Scheme has the investors would be deemed to have voted in already disclosed such investment as part of its favour of such investment. Additional consent proposed asset allocation, at the time of launch requirement will be redundant. of the scheme. 42 46 (g) Derivatives including commodity derivatives, The IFSCA had permitted IFSC Banking Units and Offshore Derivative Instruments (ODIs) subject non-bank entities, registered with SEBI as FPIs, to to suitable disclosures in the placement issue Derivative Instruments with Indian securities memorandum as underlying, in GIFT-IFSC. Provided that pending deployment of money, The same is now being requested to be included for FME may invest money in certificates of deposit, clarification with a view of Ease of Doing Business units of investment or Mutual Fund schemes for FMEs registered with IFSCA. such as overnight or liquid or money market schemes, money market instruments, bank deposits or any other securities or financial assets or instruments as may be specified by the Authority 43 132 The requirement of appointing custodian may be The portfolio of fund of fund schemes consists of the removed for feeder schemes structure. units of master scheme. The exemption on appointment of custodian may be considered in line with the exemption proposed in this consultation paper for appointment of independent third-party service provider for valuation of investments.44 132 Fund of Funds (FOFs) should be exempted from The requirement for appointing a custodian could be the requirement of appointing custodians. In exempted for Funds of Funds (FOFs), akin to the FOFs, the custodians would be holding only relaxation provided for independent party valuation statements / contract notes as many Master for FOFs Funds issue only statement or contract notes. However, the Master Funds do have the custodians. 45 44 The concept of Joint Investors {similar to proviso For clarity included under regulation 32 (2)} should be included under Regulation 44 also. 46 IFSCA Currently, the FME is required to pay USD The PPM filling fees to IFSCA authority is much circular 22,500/- fee for filing placement memorandum / higher than SEBI filling fees. on Fee offer document for CAT-II and Retail Fund with structure the Authority. To reduce the operating cost for FME, it is hereby for the suggested to reduce the filling fees for PPM/Offer entities For all categories of the Fund, the Fee for filing documents. undertaki placement memorandum / offer document will be ng or reduced by 90%. IFSCA filling fees will be align with the SEBI filling intending fees. to undertak e permissi ble activities in IFSC 47 Part C: All the Investment restrictions, for retail schemes The FME shall have to adhere all the investment Retail shall be adhered/monitored at the time of making restrictions and limits at the time of making Schemes investment. investment and not on Mark to Market (MTM). -47- Investme The same is now requested for clarification with a nt view of Ease of Doing Business for FMEs registered Restrictio with IFSCA. ns and Scheme Corpus48 Part C: Provided further that the limit on single company Limits prescribed for single issuer company should Retail shall not be applicable in case of sectoral or not be applicable/restricted to 10/15% for sectoral Schemes thematic or Index schemes. and thematic schemes, considering there might be -47 (3)- limited number of constituents available for the Investme scheme if they are belonging to particular sector or nt following a thematic index. Restrictio ns and Scheme Corpus 49 Part C: All the investment restriction shall not be Schemes which are sectoral, thematic or which is Retail applicable to retail scheme which is not sectoral an outbound fund where benchmark representation Schemes or thematic or Index schemes and investing in of stocks may be overweight for a particular sector -47 (1) offshore jurisdiction. (for eg: In USA, many benchmarks have technology (2) (3) sector as an overweight). In the interest of investor (4)- and with an aim to promote more retail schemes in Investme IFSCA, it is proposed that relaxation be given to nt retail scheme which are sectoral or thematic or Restrictio Index schemes or schemes which predominantly ns and invest in offshore jurisdiction. Scheme Corpus 50 137 The FME having retail license is also allowed to The Setting up offshore branch office allow FME to open offshore branch to market and client be “on the ground” vs. the current “fly in” approach service for funds which are set up in GIFT City to highlight FME capabilities and to market and and managed by FME entity, without any client service for funds which are set up in GIFT City approval of authority. and managed by FME entity. 51 Confirma We suggest to modify the declaration as follows: In order to develop business and functional May be partially accepted tions & We shall ensure that within a period of 2 years expertise, the employees may have to work from Declarati from the commencement of operation, the locations outside IFSC in the initial period of ons Principal Officer and other KMPs as provided business set-up. Hence, we request the authority to under sub-regulation (2) and (3) of regulation 7 allow some flexibility in this regard. Once, the shall be based out of IFSC. business is stabilised, there will not be any dearth in the availability of quality resources in IFSC.52 7(4) Number of years experience criteria should be Recently, SEBI has replaced relevant number of - removed for all KMPs appointed under the FME years’ experience with the certification requirement Regulations for key investment team in SEBI (Alternative Investment Funds) Regulations, 2012. In this consultation paper, it is envisaged that the KMPs of FME are required to undergo certification requirement. Therefore, it is proposed that the criteria of relevant number of years’ experience may be removed. The certification can have a validity period, necessitating renewal to ensure KMPs possess specialised and up-to-date knowledge. 53 31(2) The option of one time extension by IFSCA up to This option will enable the funds who faces genuine - 12 months to the time line for declaring the first challenges to represent to the IFSCA for extension close should be considered based on the with nominal fee as against full fee. request of the FME on payment of nominal fee. 54 35(2) The minimum corpus for the open ended This will enable the open ended scheme to make - restricted scheme can be reduced to USD 1 deployment on reaching the USD 1 million corpus million with the provision of reaching USD 3 and then it can create its track record for raising million within period of 12 months from the further commitment from the investors. closing of initial offer period. 55 132 The requirement of appointing custodian may be The portfolio of fund of fund schemes consists of the - removed for feeder schemes structure. units of master scheme. The exemption on appointment of custodian may be considered in line with the exemption proposed in this consultation paper for appointment of independent third-party service provider for valuation of investments. 56 35(4) We understand that intention of the IFSCA that We understand that intention of the IFSCA that the - the Restricted schemes shall not buy or sell Restricted schemes shall not buy or sell securities securities from associates, other schemes of the from associates, other schemes of the FME or its FME or its associates. (i.e. inter scheme transfer associates. (i.e. inter scheme transfer of securities). of securities). This will not cover investment in the other schemes This will not cover investment in the other of FME and associates (i.e. buying and selling the schemes of FME and associates (i.e. buying and units of the schemes of the FME or associates). selling the units of the schemes of the FME orassociates). Such investment should not trigger Such investment should not trigger approval of the approval of the unit holders. unit holders. 57 1. 3 years should be revived back to 5 years. 1. 3 years’ experience with ICSI degree to act as Issues: i) There is a possibility that 2. Criterial of Listed Company experience should Compliance Officer will go against international FMEs for saving on monetary part, be completely removed as eligibility. standard and also this experience is not material may end up selecting lesser enough to take on independent responsibilities of experienced guy since regulation Compliance Officer. allows, and then there is possibility of control from out of IFSC. In my 2. Listed Company’s CS from any non financial view, it may kill KMP status, as sector will not help in any case. In my opinion, as I basic principles of independence have initially worked in listed company, they may may be lost with this have idea on governance being part of listed companies, however, on specific skill set match, ii) The proposed changes in they shouldn’t be directly eligible. eligibility criteria for Compliance Officer may affect career of people like me who have moved all the way from other financial based cities like Mumbai, Bengaluru etc. and also for those who have moved from foreign jurisdiction like Mauritius, Singapore due to their fund getting relocated. Companies wouldn’t prefer more experienced person here in GIFT and it will defeat the purpose of moving from other financial sector base cities / jurisdictions. Suggestion – i) Request to keep the 5 years criteria intact for any KMP including CO or If this proposed eligibility criteria becomes part of regulations, there should be strict norms/guidelines stipulated from IFSCA w.r.t independence and Chinese wall mechanism, ii) listed company experience of 3 years, shouldn't be the eligibility criteriafor any of the FME at all, or associate listed company requirement with experience in relevant sector only. I have moved from Mumbai with strong AIF experience. When I decided to move to GIFT, I had certain things in mind that I want to work in different jurisdiction and want to create my own domain with the requisite skillset I already possess. With such kind of criteria for Compliance Officer position, people like me may lose career progress, and we may have to unfortunately go back to earlier jurisdiction to safeguard career. 58 7(3) In the consultation paper, it is proposed to It is suggested to define the role of the third KMP to appoint an additional (third) KMP in case where ensure that the FME operates in a compliant, AUM is USD 1 Billion or more at the close of a efficient, and effective manner with a strong financial year. It is also mentioned that such governance framework that boost the confidence of additional (third) KMP should be designated with the investors in funds. the responsibility of fund management. FME's are subject to robust regulations that require However, the proposal does not clearly define clearly defined roles and responsibilities, for KMPs. the exact role and responsibility of such Further, clarity in roles will also avoid any additional (third) KPM. overlapping of responsibilities between all the three This is requested to provide clarity on the same KPMs. This is to avoid ambiguity and to ensure the accountability and robust governance structure.59 7(4) Currently, the KMPs based out of IFSC have to Currently the KMPs based in IFSC are required to meet a triple layer criterion of educational meet the following criteria to be eligible for being qualification, experience and certification employed in IFSC: requirement in order to be based in IFSC. • Educational qualification; and We propose that the same shall be relaxed and • Experience requirement; and the KMPs shall be required to meet only one of • Certification requirement. the specified criteria. Existence of such criteria for the KMPs in IFSC would create roadblocks and may bring hardships for the players proposing to have their business in IFSC. Such stringent qualification criteria may deter highly skilled professionals who have significant experience but may not meet the educational or certification requirements from entering into the IFSC. Further, various IFSCs around the globe do not prescribe such a qualification criteria for the employees based in IFSC. Given the pace of growth in the FME sector of the IFSCs, it is considered as an emerging business opportunity for the market players to set up their business in IFSC. However, introduction of such stringent provisions in relation to the employee qualification may hamper the growth rate of the FME sector. Further, basis the consultation, the certification requirement has been made applicable to the employees of IFSC. A clarity shall be brought with respect to the specific employees to whom such criteria would apply.60 19(3) If FME fails to declare the first closure of the The GIFT IFSC is currently a growing region. Fund scheme within 12 months from the placement of managers will need to convey to investors the the memorandum, a nominal fee of USD 500 is advantages and potential of the landscape, as well proposed to be charged for filing the scheme as its future prospects, in order to enhance their document instead of the standard full fee which confidence. They must assure investors that the is required to be paid as fresh filling of scheme. funds are safe and operating within a strong regulatory framework that fosters integrity and transparency. It takes time to gain the confidence of investors and convince them to invest in the funds setup in the GIFT IFSC region. Thus, achieving the minimum corpus may take more time, even beyond 12 months as proposed in the consultation paper. 61 31(1) Clarity on the time to launch the scheme post Originally, the FME regulations specified a 21-day filing of PPM time limit to launch the scheme post filing of the PPM and post receipt of comments from the IFSCA. However, the said time limit is proposed to be deleted in the consultation paper. Given that there is no time limit prescribed for launching the scheme post filing of the PPM, there is an ambiguity in connection with the same. One may take a conservative view that the scheme shall be launched only after receipt of comments from the IFSCA. However, the proposed regulations do not specify any time limit for IFSCA to provide their comments which would result in unnecessary delay in the scheme launch process. In the contrary, one may take a view that the scheme shall be launched immediately post filing of the PPM. In light of the above, we propose to bring clarity as regards the time limit of launching the scheme62 35(2) A non-retail scheme may launch an open-ended Rationale for closed ended scheme: scheme and closed ended scheme. In case of non-retail scheme, the FME Regulations prescribes for minimum investment criteria at In the consultation paper, the Authority has investor level as well as fund / scheme level. For a proposed reducing the minimum corpus size of closed ended scheme, it is becoming difficult for the restricted scheme to USD 3 million. FMEs to raise funds from investors especially to meet the minimum corpus criteria at fund / scheme Proposal for closed ended Scheme: level. It is proposed that the minimum corpus size requirement for the closed ended scheme Considering the above, we propose to facilitate should be removed. ease by removing the requirement for a minimum scheme size, specifically for close-ended schemes. Proposal for open ended Scheme: It is proposed that the minimum corpus size for Alternatively, FMEs launching closed ended non- open ended scheme should be USD 1 million retail scheme should be permitted to commit for a minimum corpus limit as per the requirement of the scheme subject to mentioning of the same in the PPM / scheme document. Rationale for open ended scheme: Lower threshold shall enable FMEs to gather fund and launch schemes faster. Also, this shall quickly bring up / increase volume for funds set up in ecosystem 63 55(1) Clarity on the time to launch the scheme post Originally, the FME regulations specified a 21-day filing of PPM time limit to launch the scheme post filing of the PPM and post receipt of comments from the IFSCA. However, the said time limit is proposed to be deleted in the consultation paper. Given that there is no time limit prescribed for launching the scheme post filing of the PPM, there is an ambiguity in connection with the same. One may take a conservative view that the scheme shall be launched only after receipt of comments from the IFSCA. However, the proposed regulations do not specify any time limit for IFSCA to provide their comments which would result in unnecessary delay in the scheme launch process. In the contrary, onemay take a view that the scheme shall be launched immediately post filing of the PPM. In light of the above, we propose to bring clarity as regards the time limit of launching the scheme 64 77(1) In Consultation paper, it is proposed to reduce Currently in mainland India, the investment limits for the funds or securities from the client to UDS PMS (Portfolio Management Services) clients are 75,000 in case of portfolio management specified by the market regulator SEBI, amounting agreement. Here, we proposed to reduce the to INR 50 lakhs. Thus, to bring parity and to increase funds or securities from the Investors / clients to investor participation in the GIFT IFSC region. We UDS 50,000. proposed to reduce the Investments / funds limits to for PMS services offer by FME's to USD 50,000. 65 135(1) This Regulation prescribes that every scheme The FME is the investment manager for the fund, SEBI’s Alternative Investment launched by FME shall have the annual from which it earns a management fees. The FME’s Funds Regulations, 2012 (AIF statement of accounts audited by an auditor who responsibility is to manage the AIF scheme / Funds, Regulations), will also allow the is not in any way associated with the FME. necessitating the setup of comprehensive appointment of the same auditors We proposed amending this regulation to infrastructure which includes technology, personnel, for both the FMEs the AIF remove the condition which states that “an fixed assets etc. Schemes / funds. Auditor who is not in any way associated with the The FME prepares its own financial statements, FME.” which includes its revenue from managing the AIF Scheme and the expenses related to fund management, as well as corresponding assets and liabilities. Separately, the AIF Scheme/Fund prepares its financial statements, which includes the funds received from investors (Unit Capital), investments made, the income generated from these investments, and specific expenses permitted by the approved schemes documents. Thus, considering the above, it is proposed that IFSC Authority may consider appointing the same auditors for both the AIF and the FME to: Ø Enhance transparency in the accounting treatments reflected in the financial statements of both the AIF and the FME. Ø Increase accountability in the auditing of shared processes between the FME and the AIF.Ø Bring the auditing practices which is in line with the SEBI AIF Regulations. 66 Online tracking mechanism should be put in This shall smoothen the process of submission and place for PPM document indicating date & time approval of PPM documents. Also, it shall bring of submission, stage at which the same is under transparency for overall approval process regards process, option to ask and respond questions / PPM document. submit documents, final approval etc. 67 7 (4) (a) We would like to submit that the language of the Ease of Doing Business proposed amendment should be modified as below. Proposed Amendments- (a) A professional qualification or post-graduate degree or post graduate diploma (minimum two years one year in duration) in finance, law, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university which is recognized by University Grants Commission or by any other commission/council/board/body established under an Act of Parliament in India for the purpose or an institute/association affiliated with such university or an institution recognized/established by the Central Government or any State Government or autonomous institute falling under administrative control of Government of India or a recognised foreign university or institution or association or a CFA or a FRM from Global Association of Risk Professionals; or any other qualifications may be specified by the Authority and68 7(4) (b) The exception of 3 years of experience Ease of Doing Business requirement for Compliance Officer should be extended to all candidates having professional qualification. We would like to submit that the language of the proposed amendment in the proviso should be modified as below. Proposed Amendments- Provided that for the KMP provided under sub- regulation (2), the experience as provided above shall be required for a minimum period of 3 years if such KMP is a member of Institute of Company Secretaries of India is a member Institute of Chartered Accountants of India, Institute of Company Secretaries of India, Institute of Cost Accountants of India or Bachelor of Laws (LLB) from a university or an institution recognised by the Central Government or any State Government or any institution equivalent thereto in a foreign jurisdiction or any institution equivalent thereto in a foreign jurisdiction and has experience in compliance or risk management in an entity regulated by a financial sector regulator or a listed company. 69 7(5) 1. The certification requirements should not be Certification Requirement should be made applicable for all employees of the FME. The applicable for specific roles/ KMPs of the FME as requirement of undergoing specified there can be employees appointed for back office/ certifications should be applicable only to admin functions who are not directly involved in fund specific KMPs of the FME. related activities. 2. KMPs/ Employees of the FME with professional qualifications (as defined in the Further, exemption should be provided to those who explanation of the regulation) should be exempt already have professional qualifications as they from the requirement of undergoing certification. would already be subject matter expert or have practical experience of the same.70 31 (1) The said provisions require that the FME shall Currently, for the Fund setup cost (which has to be Link reference of Singapore- & launch any scheme after a draft offer document borne by FMEs or Investors) 50% component is in ACRA: 43 (1) is filed with the Authority along with the relation to IFSCA scheme application fees. https://www.acra.gov.sg/how-to- applicable application fees. guides/setting-up-a-vcc/vcc-filing- The Regulatory fees for launch of Schemes is on fees Currently, as per IFSCA circular on Fees, or higher side, this is impacting the launch of multiple Restricted schemes fees is USD 22,500 and for funds and is increasing the burden on the investors. Link reference of Mauritius-FSC: Retail schemes fees is USD 22,500. https://www.fscmauritius.org/en/ot Considering one of the objectives to set up IFSC in hers/codified-list Reduction in IFSCA Fund Application Fees: India was to be cost efficient, there is a need to reduce the cost of set up including operation cost of We would like to submit that the scheme launch the Funds and FMEs, the reduction in regulatory fees are on higher side. fees may be re-considered. We would like to submit that the Regulatory approval fees in other comparable jurisdictions like Singapore and Mauritius are in the range of USD 8,000- USD 10,000. Thus, we would suggest in light of objective of reduction of cost of compliance, IFSCA may re- consider the scheme application fees. 71 31 (2) The timeline of 21 working days (after receipt of There should be an outer timeline for providing application in the specified format) for providing comments to the FME by the Authority. comments on the Fund Documents by the Authority should be retained. Further, Global Institutional Investors usually prefer Fund documents which are approved by the Local Authority prior to making any investment decisions. 72 31 (2) 1. The requirement of re-submission of Ease of Doing Business & placement memorandum and payment of full 43 fees should be relaxed. Instead of payment of full fees for such already approved schemes, IFSCA may specify a nominal fees payment (i.e. USD 500). 2. Under Regulation 43, there should be a similar provision of providing extension if minimum size is not achieved.73 35 (2) We agree the changes proposed for Closed- The Funds launched have to wait for deployment/ Link reference of Mauritius-FSC: & ended schemes. investment into eligible securities till minimum size Our Enabling Laws - Financial 47 (6) of the Fund is achieved. This may result in Services Commission - Mauritius We have following suggestions for Open-ended opportunity loss and time loss for the Investors/ (fscmauritius.org) schemes. Request IFSCA to consider any of the FME. below suggested alternatives - Supervision Q & As - Financial Further, if we look at global practices such as in Services Commission - Mauritius Alternative 1- Removal of condition of minimum Singapore and Mauritius there is no concept of (fscmauritius.org) size for Open-ended schemes: Minimum size of the Fund. The Authority thus should align with this global practice. We would like to submit that minimum size of the Scheme requirement can be removed for Open- ended schemes. This is considering the Global practices wherein no minimum size of the scheme is been prescribed. Alternative 2- Relaxation for Open-ended schemes launched by FMEs: FME should be allowed to launch the restricted schemes once the first investment commitment (i.e. USD 150,000) is received by the scheme. Further, there may be a requirement to bring minimum size of the restricted schemes to USD 3 million within 1 year from launch date of the scheme. In case, the minimum fund corpus is not received within 1 year from launch date of the scheme, then the Authority may consider granting extension on case-to-case basis subject to payment of specified fees. 74 44 The concept of Joint Investors {similar to proviso Clarification included under regulation 32 (2)} should be included under Regulation 44 also.75 Regulati It is proposed to waive off the requirement of The requirement for minimum experience which on minimum experience. forms part of the current FME Regulations is similar 7(4)(b) to the provisions to SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). SEBI had vide its Gazette notification dated June 15, 2023 deleted the provisions of the requirement for minimum experience. Further, SEBI vide its consultation paper dated August 6, 2024 for Investment Adviser and Research Analyst has proposed to remove the requirement for minimum experience for the key personnel. In this regard, the rationale provided in the aforesaid consultation papers is as follows: "The requirement of having minimum experience for Principal Officer and other KMPs (Personnel) may act as a barrier for new age/ first generation Personnel who may not have requisite experience to satisfy the regulatory requirement but have new models to carry out fund management and related activities to generate returns for the investors. Incidentally, no specific experience requirements have been prescribed under the SEBI (Mutual Funds) Regulations, 1996 for directors and key personnel of a mutual fund/Asset Management Company even though there is retail investor participation. With respect to Investment Adviser Regulations, the proposed certification requirements under Regulation 7(5) for the employees of FMEs in IFSC shall ensure that such employees possess relevant knowledge and skills desired to provide their services". In view of the above, it is proposed to dispense with the experience requirements for registration of FME."76 Regulati The requirement to invest minimum applicable The third proviso of the sub regulation states the on 32(2) investment amount for each investor acting following: together as joint investors should not be "Provided further that a FME may accept mandatory. investments in a Restricted scheme from multiple investors acting together as joint investors, wherein each such investor shall invest at least the minimum applicable investment amount." The fourth proviso of the sub regulation states the following: "Provided further that the following individuals, not more than 2, when act as joint investor, the aggregate investment by such individuals shall be at least USD 150,000: (i) An investor and his/her spouse (ii) An investor and his/her parent (iii) An investor and his/her daughter/son" A combined reading of the aforesaid provisions creates an ambiguity on the requirement of the joint investor to invest in the scheme. Since the rationale for permitting joint investments in the aforesaid relationships is to enable and attract more investors the requirement of each joint investor investing the minimum applicable amount should not be made mandatory. Either of the investor (from the aforesaid relationship) should be able to make the investment from his/her bank account.77 7(4) a. The qualifications to include any person who a. The Fund Manager certification has become Fund Management regimes in has been certified as a Fund Manager under the mandatory for every AIF which is being registered Singapore, UAE, permit for course specified by SEBI under regulation no. with SEBI and since many such Fund Managers outsourcing of these roles. ____________ as an alternate qualification would be keen to set-up funds at IFSC, the criterion. qualifications should include this certification as an alternate to other qualifications defined there in the b. The FME, whose parent organisation is an regulation. Investment Manager of an AIF registered with SEBI (“IM-FME”) should be exempted from b. Many IM-FME’s are setting up FME’s at IFSC. As appointing POs and KMPs domiciled at IFC. per the requirements of SEBI Regulations, Investment Managers are required to appoint PO & c. Given the proposal for introduction of Variable Compliance Officer, and the Fund Management Capital Company (VCC) in the Union Budget of Team are also required to have relevant experience 2024, outsourced PO & CO functions should be and / or Fund Manager Certification. Given that IM- permitted FME’s are permitted to manage multiple Funds with the same PO, CO & Fund Management team, the d. FME’s other than IM-FME’s who are same team should be allowed to manage Funds managing threshold AUM’s as below should be being set-up by such IM-FME’s at IFSC without allowed a timeframe of 3 years to appoint POs, requiring to appoint duplicate roles at IFSC. COs & KMPs domiciled at IFSC: (i) USD 50 million or higher, should be required c. In other jurisdictions & fund management to domicile PO, CO & KMPs at IFSC regimes, Fund Managers outsource the regulatory (ii) USD 15 million or higher but less than USD & compliance requirements of their schemes to the 50 million, should be required to domicile a CO umbrella VCC entity. at IFSC (iii) Less than USD 15 million, should be allowed d. These requirements increase the cost of to outsource their PO & CO requirements. operations of a fund and the operations will be unviable for funds with AUMs lower than USD 15 million 78 31(2) e. Where the PPM is that of a Feeder Fund, e. As the name suggests, the Feeder Fund pools feeding into a Master Fund which is registered moneys for investment only and only into the Master with SEBI or any other jurisdiction, the Feeder Fund. Validity period and requirement of Fund should not be required to announce a first announcing first close for the Feeder Fund is close as it is only a feeder vehicle. Hence, the irrelevant given that it is linked completely with the 12-month validity period of a Feeder Fund’s PPM Master Fund, which is required to comply to the should not be applicable to a Feeder Fund. requirements of first close, etc. The objective of being just a pooling entity gets defeated if the Feeder Fund is required to comply with these requirements.79 35(2) f. Again, with respect to Feeder Fund, given their f. The Feeder Fund remains open for subscription f. Fund management regimes in linkage to the Master Fund, there should not be as long as the Master Fund’s subscription period is other jurisdictions do not have a any minimum size / corpus requirement. open. Further, given that the Feeder Fund pools minimum size requirement. moneys for investment only and only into the Master Fund, the minimum size/ corpus is irrelevant and will defeat the purpose for which it was set-up. Further, operationally it will become difficult for the Master Fund to redeem the units of the Feeder Fund in the event the Feeder Fund fails to raise the minimum size / corpus. 80 40(1) g. Again, with respect to Feeder Fund as allowed g. Given that the Master Fund’s is governed by such h. Fund management regimes in by IFSCA, to be amply clear, proviso may be minimum investment requirements, Feeder Fund’s other jurisdictions do not have a inserted mentioning FME’s are not required to FME’s should be excluded from this requirement minimum investment requirement. invest the minimum amounts defined in the regulations. 81 7(1) We propose to exempt the Principal Officer from The requirement for the principal officer and other the requirement of being based out of the IFSC. KMPs as per sub-regulations (2) and (3) to be based in the IFSC presents a significant challenge for FMEs looking to establish operations in the IFSC. Many experienced professionals are located elsewhere and often hold multiple licenses, managing responsibilities across different jurisdictions. With the need to ring-fence and segregate IFSC and DTA operations, it becomes increasingly difficult for an FME to station its Principal Officer in GIFT City. 82 23, 35, We propose to reduce the minimum size of the To enhance the appeal of IFSC GIFT as a fund 47 corpus to USD 1 Million in case of Venture management hub, especially in comparison to more Capital Scheme, Restricted Scheme (Non- established jurisdictions like Dubai and Singapore, Retail) and Restricted Scheme (Retail). it may be beneficial to reconsider certain regulatory requirements. Further, in case of Fund of Funds, we suggest to keep the minimum size of the corpus as USD 1 Firstly, the current minimum corpus requirement to Million individually or USD 3 Million cumulatively announce a first close might be deterring fund calculated with the corpus of the Master managers from setting up in IFSC GIFT. By lowering Fund/Domestic Fund. this threshold to USD 1 million or potentially removing it altogether, the jurisdiction could attract Or Alternatively, given that a Fund of Funds more fund managers, particularly those managingserves as a pooling vehicle for the Master Fund, smaller or emerging funds. This adjustment could which is already subject to minimum corpus significantly contribute to the growth and requirements under the SEBI AIF Regulations, diversification of the financial ecosystem at IFSC we propose eliminating the separate minimum GIFT. corpus requirement for Fund of Funds (FoF) in GIFT IFSC in order to serve the purposes of the Secondly, for Fund of Funds (FoFs), it may be more Feeder Fund considering the objective of the appropriate to consider the combined corpus of both FoF being pooling vehicle is deploying the funds the FoF and the Master Fund when determining the in Master Fund which is already operational and minimum corpus requirement. This approach would has started making investments in the portfolio better reflect the structure of these investment entities. vehicles and could make IFSC GIFT a more competitive and attractive option for fund managers operating in this space. 83 19(3), 31 In absence of green channel, we propose to start PPM is the document basis which potential the validity from date of letter of authorization investors are approached for investments. received from the Authority instead of date of Circulation of the PPM without approval of the filing the PPM with the Authority. Authority is a concern for the investors. Further, please note SEBI AIF Regulations also starts the validity from date of SEBI communication for taking the PPM of the scheme on record. Therefore, date of letter of authorization signifies approval of the Authority to launch the Scheme and hence the validity should begin as on that date. 84 31(1), 31 In case green channel is opted, we propose to To facilitate EoDB, maximum time should be given (2) clarify if the scheme is said to be launched as to the FME to raise commitments before the validity soon as the FME files the PPM with the authority of the PPM lapses. We propose to explicitly define and it can begin accepting commitments from the "launch of scheme" to avoid any ambiguity. the potential investors.85 26(2), As per the regulation 26(2), 38(2) and 50(2) read The FME Regulations are silent on the frequency of 38(2), with Sixth Schedule of the FME Regulations, we conducting the valuation of assets of the scheme. 50(2) seek clarification on the frequency for which the Please note that the SEBI AIF Regulations specifies valuation of assets of the scheme is required to the frequency as half yearly or yearly with super be conducted in case of Venture Capital majority approval. We propose that the FME Scheme, Restricted Scheme (Non-Retail) and Regulations be aligned with these requirements to Restricted Scheme (Retail). ensure consistent valuation practices. Exemption from Valuation for Fund of Funds is a welcome move. 86 31(2) We propose to reduce the fees for extending the The rationale for charging fees equivalent to those validity of the PPM to 25% of the applicable fees. for a fresh scheme is based on SEBI AIF Regulations. However, under these regulations, the scheme fee is only INR 1 lakh plus applicable taxes, regardless of the AIF category. In contrast, the IFSC proposes to impose full set-up fees of USD 7,500, USD 15,000, and USD 22,500 for re-filing or extending the validity of the PPM. These fees are excessive even in comparison to other jurisdictions and do not support EoDB. A nominal administrative fee should be levied. 87 31(3) 31(3) The requirement under sub-regulation (2) A clarification is required that if proposed changes shall not be applicable for restricted schemes are made to Regulation 31(2), what shall be the soliciting money only from accredited investors timelines for restricted schemes soliciting money i.e. such restricted schemes shall be under a only from accredited investors. green channel and can open for subscription from investors immediately upon filing with the Authority. If sub-regulation (2) is re-defined, it impacts sub-regulation (3) as well. 88 Circular We seek clarification on operational matters for A clarification is required if one scheme of the Angel on Angel Angel Funds pooling funds from resident and Fund be pooled to invest in India (having only non- Funds* non-resident investors and intending to invest in resident investors) and another Scheme be pooled India or outside India through its separate to invest outside India (having both Indian resident schemes/segregated portfolios, considering the and non-resident investors) application of FEMA regulations. 89 2(1)(q) Accept the proposed amendment. The amendment corrects a typographical error, None ensuring the regulation is clear and accurate.90 3(4)(a) Clarify the term "family" in "Family Investment Ensures that the regulation clearly defines Global best practices in defining Fund". scenarios where separate management entities and family office structures can be investment vehicles are set up by families. referenced. 91 4(1)(a) No comments. The proposal provides clarity regarding the None inclusion of securities. 92 4(4) No comments. The proposal clarifies that contributions by family None members are excluded from the definition of specified investors. 93 5(5) Suggest adding examples of "similar Provides clearer guidance to FMEs on the scope of Examples from other jurisdictions arrangements". similar arrangements, reducing ambiguity. can be provided. 94 6(2) Suggest adding a timeline for notifying IFSCA of Ensures that there is a clear deadline for FMEs to None changes. inform IFSCA about changes, promoting timely compliance. 95 7(1) No comments. The amendment provides necessary clarity on None requirements for registration applications. 96 9(3) Suggest specifying the format for internal audit Standardizing the format will facilitate easier review Internal audit report formats from reports. and compliance checks by IFSCA. other financial centers can be considered. 97 10(1)(d) No comments. The amendment aligns the regulation with other None regulatory frameworks by clarifying the scope of permitted activities. 98 11(1) No comments. The proposal clarifies the conditions under which an None FME can start operations, providing clear guidelines. 99 12(2) Suggest including a mechanism for appeals Provides a fair process for FMEs to contest Appeal mechanisms from other against suspension orders. suspension decisions, ensuring transparency and regulatory frameworks can be accountability. referenced. 100 13(1) No comments. The amendment specifies the conditions under None which an FME can offer multiple schemes, providing clarity.101 14(1) Suggest defining "significant" in "significant Ensures there is no ambiguity regarding what Definitions from other regulatory beneficial ownership". constitutes significant ownership, promoting clarity. frameworks can be referenced. 102 15(1)(b) No comments. The proposal provides clarity on the minimum None corpus required for different schemes, ensuring clear guidelines. 103 16(1)(c) Suggest adding a clause for reviewing and Ensures that the valuation policy remains relevant Valuation policy review practices updating the valuation policy. and up-to-date with market conditions. from other financial centers can be considered. 104 17(2) No comments. The amendment specifies the requirements for None appointment of custodians, ensuring clear guidelines. 105 18(1) Suggest specifying the frequency of compliance Ensures that FMEs have clear guidelines on how Compliance reporting frequencies reporting. often they need to report compliance, promoting from other jurisdictions can be regular updates. referenced. 106 19(2) No comments. The proposal provides clarity on the conditions None under which an FME can change its principal officer, ensuring clear guidelines. 107 20(1) Suggest defining "material changes" in the Ensures there is no ambiguity regarding what Definitions from other regulatory regulation. constitutes material changes, promoting clarity. frameworks can be referenced. 108 21(1) No comments. The amendment specifies the requirements for None maintaining records, ensuring clear guidelines. 109 22(1) Suggest specifying a timeline for compliance Ensures that FMEs have clear deadlines for Reporting timelines from other with reporting requirements. reporting, promoting timely compliance. jurisdictions can be referenced. 110 23(2) No comments. The proposal provides clarity on the conditions None under which an FME can outsource activities, ensuring clear guidelines. 111 24(1) Suggest adding a clause for periodic review of Ensures that the risk management policy remains Risk management policy review the risk management policy. relevant and up-to-date with market conditions. practices from other financial centers can be considered. 112 25(1) No comments. The amendment specifies the requirements for None conducting due diligence, ensuring clear guidelines.113 26(2) No comments. The proposal provides clarity on the conditions None under which an FME can offer leverage, ensuring clear guidelines. 114 27(1) Suggest defining "reasonable steps" in the Ensures there is no ambiguity regarding what Definitions from other regulatory regulation. constitutes reasonable steps, promoting clarity. frameworks can be referenced. 115 28(1) No comments. The amendment specifies the requirements for None disclosure of conflicts of interest, ensuring clear guidelines. 116 29(2) Suggest specifying a timeline for compliance Ensures that FMEs have clear deadlines for Disclosure timelines from other with disclosure requirements. disclosure, promoting timely compliance. jurisdictions can be referenced. 117 30(1) No comments. The proposal provides clarity on the conditions None under which an FME can enter into related party transactions, ensuring clear guidelines. 118 31(2) No comments. The amendment specifies the requirements for None reporting related party transactions, ensuring clear guidelines. 119 32(1) Suggest adding a clause for periodic review of Ensures that the investment policy remains relevant Investment policy review practices the investment policy. and up-to-date with market conditions. from other financial centers can be considered. 120 33(1) No comments. The proposal provides clarity on the conditions None under which an FME can offer different classes of units, ensuring clear guidelines. 121 34(2) Suggest specifying a timeline for compliance Ensures that FMEs have clear deadlines for Communication timelines from with unit holder communication requirements. communicating with unit holders, promoting timely other jurisdictions can be compliance. referenced. 122 35(1) No comments. The amendment specifies the requirements for None maintaining records of unit holders, ensuring clear guidelines. 123 36(2) No comments. The proposal provides clarity on the conditions None under which an FME can offer buy-back of units, ensuring clear guidelines.124 37(1) Suggest adding a clause for periodic review of Ensures that the pricing policy remains relevant and Pricing policy review practices the pricing policy. up-to-date with market conditions. from other financial centers can be considered. 125 7(3) Appointment of additional KMP by Registered • Currently, the Registered FME (Non-retail) is FME (Non-retail) managing Assets under required to appoint the below mentioned 2 KMPs: management (‘AUM’) of at least USD 1 billion 1. Principal officer - responsible for overall activities • To enhance the ease of doing business, we of the FME including but not limited to fund request your goodself to kindly consider not management, risk management and compliance; extending the requirement to appoint an and additional KMP to Registered FME (Non-retail). 2. Compliance officer - responsible for compliance Your goodself will appreciate that this will reduce with regulations and ensure suitable risk undue financial and operational pressures on management policies and practices at the FME. Registered FME (Non-retail), while still • The proposed amendment shall mandate supporting effective regulatory compliance. Registered FME (Non-retail) managing an AUM of at least USD 1 billion, to appoint an additional KMP with the responsibility of fund management, which shall lead to substantial operational and financial challenges to such FMEs. • Currently, FMEs face considerable difficulties in recruiting 2 KMPs, due to (i) stringent minimum educational qualification and experience requirements, and (ii) lack of sufficient talent pool in the IFSC zone. Adding an additional KMP with the necessary educational qualification and experience requirements would enhance these challenges and result in significant financial and operational strain on such FMEs. • For Registered FME (Retail), the need for an additional KMP is justified given the involvement of retail money, higher number of investors and smaller ticket size, which increase risk and necessitate more robust oversight. • Conversely, Registered FME (Non-retail) do not deal with retail money and have limited investors and larger ticket size, which simplifies fund management processes and involve lesser risk. These FMEs have successfully managed their operations and complied with regulatory requirements with only 2 KMPs.• It is worthwhile to note that the rationale provided for appointment of additional KMP in the consultation paper is also in relation to Registered FME (Retail) and not for all FMEs [effective utilization of resources and rationalisation of cost of operations for Registered FME (Retail) for launching retail oriented products in IFSC]. • You may also note that the requirement of having adequate resources (minimum of 2 resources with requisite qualification and expertise) is globally accepted and prevalent in popular fund jurisdictions such as Mauritius and Singapore. However, it seems that regulatory requirement to appoint additional person based on AUM is not prevalent in the aforesaid popular fund jurisdictions. • Accordingly, we request your goodself to consider relaxing this requirement of appointing additional KMP for at least Registered FME (Non-retail) from an ease of doing business perspective. Further, such relaxation shall reduce undue operational and financial pressures.126 7(5) Certification requirement for employees of FME • FMEs are required to appoint Principal officer and Compliance officer who oversee fund management • To enhance ease of doing business, we and overall compliance respectively. request your goodself to kindly consider not to • The KMPs possess the requisite educational mandate the requirement of undergoing qualification and experience as mandated by the certification(s) to the employees of FME. FME Regulations to fulfill their roles effectively and are well-equipped to undertake their duties. • Given the requisite educational qualification and experience of the KMPs, imposing further additional certification requirements on such KMPs shall lead to unnecessary operational burden on the KMPs. • Further, other employees (i.e. employees which are not KMPs) handle operational and routine tasks like processing transactions, accounting and maintaining records, customer relationship, etc. Mandating certification for such employees does not align with their supportive and routine roles and functions. The costs and resources required for certifying all employees shall outweigh its benefits. • To enhance ease of doing business and reduce operational burden on the employees, we request your goodself to kindly consider not to mandate such certification requirement for employees of FME. 127 7(4)(b) Minimum experience requirement for the role of • The minimum period of experience for the role of Compliance officer compliance officer has been relaxed only for company secretaries from 5 years to 3 years. We request your goodself to kindly consider • Chartered Accountants have a deep reducing the minimum experience requirement understanding of financial systems, business for the role of compliance officer for members of regulations and tax laws. Their expertise enables the Institute of Chartered Accountants of India or them to navigate the complex landscape of any institution equivalent thereto in foreign compliance with a high degree of proficiency. jurisdiction, who have experience in compliance • Chartered Accountants possess extensive or risk management in an entity regulated by a knowledge of laws, statutes, and risk management financial sector regulator or a listed company. including internal controls and overall compliance. Their expertise in financial matters enhances their ability to manage compliance and reporting requirements effectively. Chartered Accountants are well suited for compliance roles like companysecretaries. • Accordingly, we request if your goodself to kindly consider extending the relaxation provided to company secretary for the minimum experience period to Chartered Accountants for the role of compliance officer as well. 128 40 Removal of maximum ceiling limit for • One of the conditions for non-applicability of cap contribution by the FME or its associate in the on the contribution by the FME or its associate in Restricted scheme in certain cases the Scheme is that the FME and its associate, • We request your goodself to kindly consider wherever applicable, are not Indian resident and do clarifying the definition of the term ‘Indian not have any Indian resident as their ultimate Resident’ to mean a ‘person resident in India’ as beneficial owners (emphasis applied). per the Foreign Exchange Management Act, • However, the term ‘Indian resident’ is not defined 1999. in the proposed amendment. The meaning of the term ‘India resident’ is different in various statutes like FEMA, income-tax. • Accordingly, we request your goodself to kindly consider providing clarity that the term ‘Indian Resident’ in the FME Regulations shall mean a ‘person resident in India’ as per the Foreign Exchange Management Act, 1999.129 36(3) Disclosure of NAV to the investors • Your goodself would appreciate that the proposed In the case of close ended scheme, we request amendment of NAV disclosure within 30 days from your goodself to kindly consider extending the the end of half year would cause administrative timeline of disclosing the NAV to investor from burden for the FMEs since the exercise of carrying 30 days to 120 days from the end of half-year. out valuation of unlisted securities and reporting of NAV (including methodology of the valuation) of each scheme is a detailed and time-consuming process which inter-alia involves (i) finalisation of financial statements by portfolio companies in which scheme has invested, (ii) collection of relevant data from the portfolio companies in which the scheme has invested, (ii) carrying out valuation of investments in portfolio companies by third party valuer, and (iv) calculation of investor level NAV. • Given the above and in order to alleviate the operational strain on FMEs, we request your goodself to kindly consider extending the timeline of disclosing the NAV to investor from 30 days to 120 days from the end of half-year in case of a close ended scheme. • Further, the aforesaid relaxation will also align with the 120 days window provided to complete the annual reporting in case of Registered FME (non- retail), as per FME regulations. 130 7(4)(b) Minimum experience requirement for the role of • The minimum period of experience for the role of Principal Officer Principal Officer is 5 years in related activities in the It is suggested to include consultancy securities market or financial products including in a experience (such as experience in Big Four portfolio manager, broker dealer, investment firms) of not more than 2 years (in the aforesaid advisor, wealth manager, research analyst or fund 5 years period), in activities related to the management. securities market or financial products – such as • Consultancy experience (such as experience in due diligence services or transaction advisory Big Four firms), in areas related to the securities services. market or financial products —such as due diligence services or transaction advisory services, equips the Principal Officer with an experience that is comparable to the roles in portfolio management, brokerage, investment advisory, wealth management, research analysis, or fund management.• Accordingly, we suggest your goodself to kindly consider including the consultancy experience (such as experience in Big Four firms) of not more than 2 years, in activities related to the securities market or financial products – such as due diligence services or transaction advisory services. 131 7(4) The requirement of having both the qualification Complying with both the requirements and finding and the experience should be reviewed. the skill at this point in time is very challenging. For the ease of doing business and attracting the right The requisite KMPs should either hold the talent based on their skill set, it is important to ease stipulated qualification or the experience. the restrictions of complying with both requirements. 132 7(3) The requirement to have the 2 KMPs should be Considering the role of the Principal Officer and across the FME license. Further, in the case of Compliance Officer provided under existing and the FME established as a Branch will have many proposed regulation, the requirement to have 3rd functions supporting the branch operations and KMP with stipulated qualification and the hence the burden to have one more KMPs experience for “Retail FME” may not be required. should not be imposed upon. Hence, the requirement to have 2 dedicated KMPs operating from GIFT IFSC should be common across the FME license irrespective of its type. 133 47(5) Clarifications required: FME acting as a feeder structure investing in a CIS The “units of mutual funds” and “units issued managed by their associate is very common and under CIS scheme” by an associate acting as a prevalent, it is the underlying in the CIS that matters CIS manager should be excluded from the and the CIS manager is only managing the same. definition of “associates”. Also SEBI regulations imposes restrictions to such CIS Managers related to investments in associate companies. 134 78 We propose to provide working details and The premise behind this proposition is that the The omnibus structure is legal in guidelines for operating the PMS Omnibus majority of non-resident foreign investors wish to many international jurisdictions, regulations invest their money in a variety of portfolios based on including the United States and t h e i r r i s k t o l e r a n c e a n d g e o g r a p h i c a l l im it a t i o n s t o M a u r i t i u s . T o a t t r a c t g r e a t e r We propose that the IFSCA, in cooperation with market access. By permitting an Omnibus structure, investment, we must connect our SEBI, authorise the pooling of funds from a the FME does not need to form AIFs for separate financial services processes with single PMS account via an FPI licence for classes of investors, and their funds can be invested today's global market. accessing the inbound India market. in their preferred investment products. This increases the liquidity of foreign investors, which benefits the entire ecosystem.135 7(3) Appointment of an additional KMP by a • The proposed amendment shall mandate Registered FME (Non-retail) which is managing Registered FME (Non-retail) managing an AUM of Assets Under Management (‘AUM’) of at least USD 1 billion and above, to appoint an additional USD 1 billion as at the close of a financial year KMP with the responsibility of fund management, which shall lead to substantial operational and 1) As per the existing regulation 7(3) of the financial challenges to such FMEs. IFSCA (Fund Management) Regulations, 2022 • FMEs are facing considerable difficulty even in (‘FME Regulations’): recruiting 2 KMPs i.e., Principal officer (who is Registered FME (Non-retail) are required to responsible for overall activities of the FME) and appoint the below mentioned 2 KMPs, i.e., Compliance officer (who is responsible for Principal Officer and Compliance Officer. compliance with regulations and ensure suitable Only Registered FME (Retail) is required to risk management policies and practices at the appoint an FME). This is due to the requirement of stringent additional Key Managerial Personnel (‘KMP’) minimum educational qualification and experience (who shall be designated with the responsibility and lack of sufficient talent pool in the IFSC zone. of fund management) in addition to the Principal Requirement of an additional KMP with the Officer and Compliance Officer. necessary educational qualification and experience would lead to an aggravation in these challenges 2) Proposed amendment as per the Consultation and may result in significant operational strain on paper: such FMEs. The aforesaid requirement applicable to • Registered FME (Retail) deal with retail money, Registered FME (Retail) of appointing an higher number of investors and smaller ticket size, additional KMP is proposed to be extended to which increases risk and necessitate more robust Registered FMEs (Non-retail) as well who oversight and hence the need for an additional KMP manage AUM of at least USD 1 billion at the is justified. close of the financial year. • However, Registered FME (Non-retail), do not deal 3) Our suggestion/ recommendation: with retail money and have limited investors and In order to reduce undue financial and larger ticket size, which simplifies fund management operational pressures on Registered FME (Non- processes and involves lesser risk. Further, these retail), it is suggested that the said requirement FMEs have managed to successfully carry out their to appoint an additional KMP should not be operations and complied with regulatory extended to Registered FME (Non-retail). requirements with only 2 KMPs. This will reduce undue financial and operational • Accordingly, requirement of appointing additional pressures on Registered FME (Non-retail), while KMP for Registered FME (Non-retail) should not be still supporting effective regulatory compliance. imposed to enhance ease of doing business and reducing undue operational pressures. 136 7(5) Certification requirement for employees of FME • The KMPs (including Principal Officer and (a) Existing Regulations: Compliance officer) possess the requisite As per regulation 7(4) of the FME Regulations, educational qualification and experience asthe KMPs (i.e. Principal Officer, Compliance mandated by the FME Regulations to fulfill their Officer, KMP designated with the responsibility roles effectively and are well-equipped to undertake of fund management) of the FME in IFSC are their duties. required to satisfy the prescribed educational • Given the requisite educational qualification and qualification and minimum experience experience of the KMPs, imposing further additional requirements. certification requirements on such KMPs shall lead Currently, there is no specific certification to unnecessary operational burden on the KMPs. requirement for employees of the FME (including • Further, other employees (i.e. employees which KMPs). are not KMPs) handle operational and routine tasks (b) Proposed amendment as per the like accounting and maintaining records, customer Consultation paper: relationship, etc. Mandating certification for such The amendment proposed as per the employees does not align with their supportive and Consultation paper seeks to mandate all routine roles and functions. employees of the FME (including KMPs) to • To enhance ease of doing business and reduce obtain certification(s) from such institutions as operational burden on the FMEs, certification specified by the IFSCA. requirement for employees of FMEs should not be (c) Our suggestion/ recommendation: mandated. To enhance ease of doing business, it is recommended to not mandate the requirement of undergoing certification(s) to the employees of FME. 137 7(4) Number of years experience criteria should be Recently, SEBI has replaced relevant number of removed for all KMPs appointed under the FME years’ experience with the certification requirement Regulations for key investment team in SEBI (Alternative Investment Funds) Regulations, 2012. In this consultation paper, it is envisaged that the KMPs of FME are required to undergo certification requirement. Therefore, it is proposed that the criteria of relevant number of years’ experience may be removed. The certification can have a validity period, necessitating renewal to ensure KMPs possess specialised and up-to-date knowledge. 138 31(2) The option of one time extension by IFSCA up to This option will enable the funds who faces genuine 12 months to the time line for declaring the first challenges to represent to the IFSCA for extension close should be considered based on the with nominal fee as against full fee. request of the FME on payment of nominal fee.139 35(2) The minimum corpus for the open ended This will enable the open ended scheme to make restricted scheme can be reduced to USD 1 deployment on reaching the USD 1 million corpus million with the provision of reaching USD 3 and then it can create its track record for raising million within period of 12 months from the further commitment from the investors. closing of initial offer period. 140 132 The requirement of appointing custodian may be The portfolio of fund of fund schemes consists of the removed for feeder schemes structure. units of master scheme. The exemption on appointment of custodian may be considered in line with the exemption proposed in this consultation paper for appointment of independent third-party service provider for valuation of investments. 141 35(4) We understand that intention of the IFSCA that We understand that intention of the IFSCA that the the Restricted schemes shall not buy or sell Restricted schemes shall not buy or sell securities securities from associates, other schemes of the from associates, other schemes of the FME or its FME or its associates. (i.e. inter scheme transfer associates. (i.e. inter scheme transfer of securities). of securities). This will not cover investment in the other schemes This will not cover investment in the other of FME and associates (i.e. buying and selling the schemes of FME and associates (i.e. buying and units of the schemes of the FME or associates). selling the units of the schemes of the FME or Such investment should not trigger approval of the associates). Such investment should not trigger unit holders. approval of the unit holders. 142 7 (3) The KMP of the FME shall be excluded from the Considering the stringent qualification and having requirement of certification(s) from such expertise knowledge and experience, the Principal institution(s) as may be specified by the Officer, Compliance Officer and Fund Manager will Authority. be excluded from the requirement of certification(s) from such institution(s) as may be specified by the Authority.143 34- (g) Derivatives including but not limited to We understand that it is already covered into the Permissi commodity derivatives, Offshore Derivative permissible investments. But it is prudent to clarify ble Instruments (ODIs), Over the counter (OTC) the same in the regulation itself. Investme Derivative Instruments, Futures, Forwards, nts Swaps, warrants, structured products, subject to We understand that it is already covered into the suitable disclosures in the placement permissible investments. But it is prudent to clarify memorandum the same in the regulation itself. Provided that pending deployment of money, FME may invest money in certificates of deposit, units of investment or Mutual Fund schemes such as overnight or liquid or money market schemes, money market instruments, bank deposits or any other securities or financial assets or instruments as may be specified by the Authority 144 35- All the Investment restrictions shall be Our understanding is that all the investment Investme adhered/monitored at the time of making restrictions shall be adhered/monitored while nt investment. making the investments and not subsequent to Restrictio them. ns and Scheme Corpus 145 46- (g) Derivatives including but not limited to We understand that it is already covered into the Permissi commodity derivatives, Offshore Derivative Permissible investments. But it is prudent to clarify ble Instruments (ODIs), Over the counter (OTC) the same in the regulations itself. investme Derivative Instruments, Futures, Forwards, nts Swaps, warrants, all kind of structured products We understand that it is already covered into the subject to suitable disclosures in the placement Permissible investments. But it is prudent to clarify memorandum the same in the regulations itself. Provided that pending deployment of money, FME may invest money in certificates of deposit, units of investment or Mutual Fund schemes such as overnight or liquid or money market schemes, money market instruments, bank deposits or any other securities or financial assets or instruments as may be specified by the Authority146 IFSCA Currently, the FME is required to pay USD Considering the one trust one scheme and to SEBI Filling Fees for Mutual Fund circular 22,500/- fee for filing placement memorandum / reduce the operating cost for FME, it is hereby Scheme is Rs. 2 lacs + GST on Fee offer document for CAT-II and Retail Fund with proposed to reduce the filling fees for PPM/Offer structure the Authority. documents and any appointment /change in For AIF-Rs. 1 Lacs + GST. for the KMP/fiduciaries. entities For all the categories of the Fund, the filing fees Further in SEBI MF Regulations undertaki for placement memorandum / offer document IFSCA filling fees will be align with the SEBI filling also, there are no prior approvals ng or should be USD 2000/- fees. required for appointment/change intending in KMP and there are no filing fees to Also there should not be any filing fees for IFSCA The lowering of the fees will attract more passive for intimation to the authority. undertak approval/intimation regarding funds and ultimately large asset owners. e appointment/change of KMP or fiduciaries. permissi ble activities in IFSC 147 7 The requirement to take prior approval from • The regulations already mandate Fit and Proper IFSCA regarding appointment/change of KMP is requirement, educational qualification and proposed to be done away with. experience for the KMP and also provides a code of conduct for them. • The FME itself will check and satisfy the requirement of qualification and experience and intimate to the authority along with Biodata and FME certification to comply the requirement of KMP within 15 working days of appointment/change of the KMP. 148 Part C: All the Investment restrictions shall be Our understanding is that all the investment Retail adhered/monitored at the time of making restrictions shall be adhered/monitored while Schemes investment. making the investments and not subsequent to -47- them. Investme nt Restrictio ns and Scheme Corpus149 Part C: Provided further that the limit on single company In case of sector or industry specific scheme, the Retail shall not be applicable in case of sectoral or upper ceiling on investments should be in Schemes thematic or Index schemes. accordance with the weightage of the scrips in the -47 (3)- representative sectoral index or sub index as Investme disclosed in the PPM or limits as prescribed under nt 47 (3) regulations, whichever is higher. Restrictio ns and Scheme Corpus 150 Part C: The Investment restriction for sectoral limit In the interest of investor and for a scheme which Retail should not be applicable for retail scheme would predominantly invest in overseas securities Schemes predominantly investing in offshore jurisdiction. (stocks or funds), it may happen that due to limited -47 (1) constituents it may be biased towards a particular (2) (3) sector and hence exemption or increase in (4)- weightage of sector limit is proposed for such type Investme of schemes. nt Restrictio This will also enable funds to diversify their risk w.r.t. ns and the following- Scheme 1) Index specific Corpus Examples- a) Tech forms 18% in DJIA; 29% in S&P500 & 50% in Nasdaq indices b) Even in India BFSI forms ~32-38% of NIFTY weights In case when an active portfolio manager intends to be overweight on a specific sector, this regulation should not restrict that in interest of the retail investors. 2) Sectors within country/index 151 137 The FME having retail license should be allowed The Setting up offshore branch office allow FME to to open offshore branch to distribute, market and be “on the ground” vs. the current “fly in” approach client service for the funds which are set up in to highlight FME capabilities and to market and IFSC and managed by FME entity only, without client service for funds which are set up in GIFT City any approval of authority. and managed by FME entity.152 7 (1), (2) Allow KMPs to hold group level positions which Allowing KMPs to hold group-level positions for both & (3) covers both FME & domestic fund management FME and domestic businesses until the AUM business till a certain AUM threshold is achieved reaches USD 100 million provides flexibility and (USD 100 mn) optimizes resource utilization in the early stages of fund development. This is crucial for smaller firms that may not yet have the scale to fully separate roles, and it supports business growth without compromising governance. 153 7(4) KMPs should be allowed to work from locations Since the KMPs are involved in business other than GIFT city office. developments and have to travel for client meetings for business purpose hence the flexibility should be allowed to operate from locations other than GIFT city office. 154 38(2) Provide clarity on frequency of valuing The current regulation lacks specificity on the timing underlying assets. and intervals for asset valuation. A clear guideline on valuation frequency (e.g., quarterly, semi- annually) would ensure consistency and transparency in reporting. Regular valuation would also help in accurately reflecting the current market value of the assets, thereby protecting the interests of all stakeholders. 155 31(1) We propose that the period of validity of PPM Looking at the current scenario of onboarding should be of 24 months from the date of approval clients in IFSCA registered funds, the funds are and in case of filing of PPM for extension of facing hurdle in getting clients onboarded/ getting period, there should be Nil fees. capital commitments due to various reasons like non availability of digital onboarding process, signing of many documents, popularity of IFSCA funds as compared to other international funds, non availability of demat facility for credit of securities etc. Considering the above we propose that the period of validity of PPM should be of 24 months from the date of approval. Further if the fund does not get the minimum capital requirement within the PPM validity period due to which it is required to extend initial offer period, since during this time the fund has not started anybusiness there should be Nil fees for extension of PPM period. 156 35(2) We propose to reduce the minimum corpus As the SEBI registered AIFs have less minimum requirement to 1 million USD. corpus requirement as compared to IFSCA registered AIFs, IFSCA registered AIFs are less popular amongst the investors. For getting capital commitment easily we propose to reduce minimum corpus. 157 7(3) The requirement to appoint a third KMP for While the requirement of third KMP for retail funds FMEs managing non-retail funds in excess of is appreciated from a risk management standpoint, USD 1 billion, may be dropped. applicability of the same to non-retail funds may deter potential fund managers from setting up operations in IFSC. This requirement may be deferred for a few more years until the ecosystem in IFSC develops and matures further. 158 7(4)(a) The language of the proposed Regulation Ease of Doing Business relating to education and experience criteria should be expanded to provide flexibility to the IFSCA to specify additional education or experience criteria by way of notification without having to wait for amendment in Regulations. 159 7(4) (b) The exception of 3 years of experience Ease of Doing Business requirement for Compliance Officer should be extended to all candidates having professional This requirement will have the effect of excluding a qualification. lot of professionals who have significant experience of advising several institutions on compliance and For the Compliance Office, the requirement of risk management but have not been employed with experience in compliance or risk management in an entity regulated by financial sector regulator or an entity regulated by the financial sector by a listed entity. regulator or a listed company should not be imposed.160 7(4) As per the proposed regulations, the KMPs A 3-layered eligibility criteria for KMPs may make Regulation 4(g) of the SEBI AIF based out of IFSC have to meet the following the regime onerous while reducing the eligible pool Regulations require certification three requirements: of potential candidates. While the introduction of the and education qualifications to be certification requirement is a welcome move, met by the key personnel • prescribed educational qualification; flexibility should be provided by making the • prescribed relevant experience; and certification requirement optional in case the • certification requirement candidate meets the experience criteria laid down in the Regulations. We suggest that the same should be relaxed and the KMPs should be required to meet either one of the specified criteria between experience and certification along with the education requirement. Without prejudice, the requirement of certification be dropped where the KMP is professionally qualified. 161 7(5) The certification requirements should not be Certification Requirement should be made applicable for all employees of the FME. The applicable for specific roles/ KMPs of the FME as requirement of undergoing specified there can be employees appointed for back office/ certifications should be applicable only to support functions who are not directly involved in specific KMPs of the FME who are entrusted with investment related activities. the responsibility of fund management. 162 19(3), In case an FME fails to declare the first close of While the extension of the time period from 6 31(2) & the scheme within 12 months from the date of months to 12 months is well appreciated, given that 55(2) filing the placement memorandum, it is IFSC ecosystem is still nascent, fund managers suggested that a reduced fee is charged for filing need more time to engage with investors to declare the scheme document with the Authority rather first close and reduced fee for refiling of PPM will than the full fee which is required to be paid as help in keeping costs reasonable. fresh filling of scheme. 163 43 A similar provision as provided in paragraph 7 should also be considered for retail schemes where minimum size is not achieved in the prescribed timeline.164 31(2) There should be an outer time limit for the IFSCA While it is appreciated that the Authority has and to provide comments to the FME on the on the provided flexibility to launch the Fund post filing the 55(2) Fund Documents. requisite documentations and deleted the 21 day requirement, there should be an outer timeline for providing comments to the FME by the Authority, in the interest of certainty. 165 31(1) & An FME is permitted to launch any scheme after We would like to submit that the Regulatory Link reference of Singapore- 43(1) a draft offer document is filed with the Authority approval fees in other comparable jurisdictions like ACRA: along with the applicable application fees. Singapore and Mauritius are lower compared to the https://www.acra.gov.sg/how-to- It would be relevant to note that the current fee proposed fees in the IFSCA FME Regulations. guides/setting-up-a-vcc/vcc-filing- for restricted schemes (Cat III AIF) and for retail fees schemes is USD 22,500. Further, the fee for a Fund Management Licensing Cat II AIF is USD 15,000. (mas.gov.sg) It is suggested that a rationalisation in the Link reference of Mauritius-FSC: regulatory fee should be considered. https://www.fscmauritius.org/en/ot hers/codified-list 166 35(2) & While the reduction in minimum size of the The Funds launched have to wait for deployment/ Link reference of Mauritius-FSC: 47(6) corpus from USD 5 million to USD 3 million is investment into eligible securities till minimum size Our Enabling Laws - Financial welcome, in the context of open-ended schemes of the Fund is achieved. This may result in Services Commission - Mauritius we suggest that no minimum corpus size be opportunity loss for the Investors/ FME. (fscmauritius.org) prescribed. Further, as per global practices such as in Singapore and Mauritius there is no requirement of Supervision Q & As - Financial Alternatively, at least in the context of open- minimum size of the Fund. Services Commission - Mauritius ended non-retail schemes, FME should be (fscmauritius.org) allowed to launch the restricted schemes once Given that there are stringent net-worth the first investment commitment (i.e. USD requirements for the FME, only serious participants 150,000) is received by the scheme and will be in a position to apply for the FME license and additional time of 1 year be granted for launch funds. increasing the corpus to the minimum size of USD 3 million. 167 47(1) & 2 The Regulation prescribes that the maximum For restricted schemes as well, the restriction is that investment in unlisted securities should not maximum investment in securities of an unlisted exceed 15% of the total AUM and that the company should not exceed twenty-five percent minimum amount of investment by an investor in (25%) of the corpus of the schemes case of close ended schemes investing more than 15% in unlisted securities, shall be USD 10,000. It is suggested that instead of the term ‘unlistedsecurities’, the reference should be ‘securities of an unlisted company’. It would be relevant to note that schemes of Mutual Funds which are regulated by SEBI may not be considered as listed securities. Accordingly, there exists an ambiguity whether Retail Funds launched in IFSC as feeder funds would be permitted to invest in domestic mutual fund schemes in excess of the limits prescribed. 168 20 & 32 It is suggested to expand the scope of Eligible This would be in line with SEBI Circular number Investors to allow subscription of profit sharing CIR/IMD/DF/14/2014 dated 19 June 2014 units by employees of the FME without any contribution. 169 31(1) Welcome move The amendment to the regulations is recognized as and (2) Suggestion: Clause 31(1) states that a Fund a measure to facilitate ease of doing business. Management Entity (FME) may launch a scheme However, it is important to note that banks will by submitting the Private Placement require a Letter of Authorization (LOA) to open an Memorandum (PPM) to the authority and the account. This requirement could impact client letter of Authorisation (LOA) shall be provided by onboarding and the pooling of funds from clients. the authority within _____ days provided that all Therefore, it is proposed that the LOA be issued conditions set forth by the authority are met. within a specified timeframe to ensure the timely launch of the scheme. This adjustment would help Suggestion: Validity period of PPM - streamline the process and mitigate any potential The regulation could include a provision delays in client onboarding and fund pooling. Under allowing for an extension of time upon payment SEBI (AIF) regulations, the fee for filing a scheme is of a nominal fee. INR 3 lakh. In contrast, the fee in the IFSC is USD 22,500 (approx. INR 18.50 lakh). Given this significant difference, it would be prudent for the authority to consider introducing an option for an extension of time, subject to the payment of a nominal fee. This adjustment would help alleviate the financial burden on FMEs and promote a more flexible regulatory environment.170 77(1) Welcome move 1. As per SEBI PMS Regulations the minimum Link for reference; investment for PMS is INR 50 Lakh (approx. https://russellinvestment IFSCA is a new jurisdiction both for Indian $60,000). s.com/us/solutions/finan residents and non residents. A smaller ticket size 2. In USA, regulators allow the fund managers to cialprofessionals/separately - than USD 150,000 makes good sense to bring decide on ticket size hence the minimum ticket size managedaccounts#ColorBoxRow the ticket at parity with other jurisdictions where there (in general) is $50,000 for non-accredited _ 454360dd-71da-4f4eb96a- account minimums are ranging between USD investor. 946647fa8be 50,000 to USD 100,000. 3. This adjustment aims to make investment opportunities more accessible to a broader range of Suggestion: It is suggested to reduce ticket size investors, thereby encouraging greater participation to USD 50,000 instead of USD 75,000 for in the market. By reducing the ticket size, the nonaccredited investors. initiative seeks to democratize investment opportunities and foster a more inclusive financial environment. 171 77(2) Welcome move 172 132 Upon reviewing the regulations, there are two Ambiguity in the Explanation Provided- primary areas where additional guidance would The existing explanation states: be beneficial. "The Custodian appointed under this regulation shall be based in an IFSC, unless the local laws of the jurisdiction where the securities have been issued do not permit the same, in which case, the FME may appoint a custodian which is based in India or a foreign jurisdiction and is regulated by the financial sector regulator of that jurisdiction." While this explanation addresses scenarios where local laws prohibit appointing an IFSC-based custodian, it still leaves room for ambiguity. Specifically, it does not explicitly clarify whether a custodian must be based in an IFSC when local laws allow such an appointment. Additionally, it does not address situations where securities are issued outside an IFSC but within India or other jurisdictions where local laws might permit or restrict the location of the custodian. To enhance the clarity and consistency of the regulations, we respectfully suggest the following revisions:1. Location Clarity: Regulation should clearly state the conditions in which” Custodian” shall be based in an IFSC or in India or a foreign jurisdiction considering the situations where the securities have been issued outside the IFSC and local laws of that jurisdiction permit/not permit appointment of custodian. These revisions would help ensure that FMEs have a clear understanding of their obligations and that the regulations are applied uniformly across all relevant entities. 173 Paragrap We suggest extending the validity of the Proposed Provision: h 31(1) & Placement Memorandum by an additional three As per the proposed amendments, the validity of the 31(2) of (3) months upon payment of a nominal fee to the Placement Memorandum of a scheme shall be IFSCA Authority, instead of requiring a fresh filing. extended to twelve (12) months from the date of Fund filing with the Authority or the date of the observation Manage This extension would provide FMEs with the letter of the Authority, whichever is later. If the FME ment necessary flexibility to secure the minimum does not achieve the first close by attaining the Regulati corpus size of USD 5 million, which is often minimum corpus size within this period, the FME is ons, delayed due to unforeseen circumstances required to file a fresh Placement Memorandum and 2022 beyond the control of FMEs. pay the full fee applicable for a new scheme. Rationale: 1. Investor Retention: Requiring a fresh filing of the Placement Memorandum, including payment of the full fee, could potentially disrupt ongoing negotiations with investors. A nominal extension fee would allow FMEs to maintain momentum and retain investor interest, facilitating quicker deployment of funds once the minimum corpus is achieved, 2. Efficiency in Operations: The process of refiling a fresh Placement Memorandum is administratively burdensome for both the FMEs and the Authority. Allowing a short extension with a nominal fee would reduce this burden while still ensuring that the Authority’s oversight remains intact. 3. Alignment with Market Realities: The capital-raising environment, especially in international financial services, is often subject to fluctuations due to market conditions. A three-month extension would provide a practical buffer, enabling FMEs to navigate these challenges without incurring unnecessary costs or procedural delays. 174 Paragrap Current Provision: We would like to propose an enhancement to the h 31(1) & As per the existing regulations, when a FME files current process of issuing acknowledgement letters 31(2) of a Placement Memorandum (PM) with the IFSCA, under Paragraphs 31(1) and 31(2) read with IFSCA IFSCA the IFSCA issues an acknowledgement letter Circular dated April 05, 2024, of the IFSCA Fund Fund upon receipt. This letter serves as a confirmation Management (FM) Regulations, 2022. Manage of the filing and subsequent comments, if any. ment Proposal: Proposed Amendment: Regulati 1. Proposal to Include Fund/Scheme Category in a) We suggest that the acknowledgement letter ons, the Acknowledgement Letters Issued by IFSCA. issued by the IFSCA should explicitly mention the 2022 2. The current provision is ambiguous with category of the fund/scheme, such as CAT-I respect to IFSCA giving its Alternative Investment Fund (AIF), CAT-III AIF, etc. observations/comments on the contents of the b) The current provision is ambiguous with respect PPM. It should be clarified that once the to IFSCA giving its observations/comments on the acknowledgement letter is issued the FME can contents of the PPM. It should be clarified that once proceed to launch the fund and not wait for any the acknowledgement letter is issued the FME can observations from the Authority. proceed to launch the fund and not wait for any observations from the Authority. Rationale: 1. If the acknowledgement letter issued by the Authority states that there shall not be further observations on the content of the PPM and on the category of fund in the PPM. It shall provide better clarity to the FMEs, and they shall be able to market their fund to the prospective investors without waiting for any further observations from the Authority. IFSC, and fulfilling other compliance requirements. This will help avoid procedural delays or deficiencies caused by the lack of explicit categorization,3. Streamlined Coordination with Other Authorities: Financial institutions, tax authorities, and other regulatory bodies often require precise details regarding the nature of the fund/scheme during various approval processes. Including the fund/scheme category on the acknowledgement letter would streamline these processes, reducing the need for additional clarifications or documentation, 4. Improved Compliance Efficiency: By providing a comprehensive acknowledgement that includes the fund/scheme category, the IFSCA can help FMEs ensure full compliance with all regulatory and administrative requirements from the outset, thereby minimizing the risk of procedural errors or omissions. 175 Paragrap Request to Reduce the Minimum Ticket Size for The recent amendment reducing the minimum h 32(2) of Restricted Schemes Under Private Placement. investment limit for Portfolio Management Services the (PMS) from USD 150,000 to USD 75,000 is a IFSCA commendable step towards aligning the IFSC with Fund international best practices and enhancing its Manage attractiveness to global investors. ment Regulati Rationale: ons, In light of this positive development, we respectfully 2022 request the IFSCA to consider extending a similar reduction in the minimum investment limit to the restricted schemes under the private placement framework, as stipulated in Paragraph 32(2) of the IFSCA Fund Management Regulations, 2022. Currently, the minimum ticket size of USD 150,000 may act as a barrier for certain segments of potential investors, particularly Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and other overseas investors who may have limited net worth and don’t want entire exposure in a single country or are in the early stages of exploringinvestment opportunities in the IFSC etc. Lowering the investment threshold to USD 75,000 for restricted schemes could significantly enhance the appeal of the IFSC as a jurisdiction for a broader range of investors. This adjustment would enable Fund Management Entities (FMEs) to pool investments from individuals who are interested in capital rationing or who prefer to start with a smaller investment as they familiarize themselves with the regulatory environment and potential returns of the IFSC. Furthermore, this would encourage greater participation in the IFSC ecosystem. We believe that such a measure would not only stimulate initial interest among overseas investors but also contribute to the long-term growth and success of the IFSC by attracting a diverse and globally distributed investor base. We kindly urge the IFSCA to consider this request, which we believe will play a pivotal role in promoting business within the IFSC and enhancing its global competitiveness. 176 Advertise Scope and applicability of advertisements. The FME Regulations define advertisement in an ments inclusive manner, whereas it should be clearly shall be defined and exhaustive to avoid any inadvertent in non-compliances. The scope for such inadvertent conformit non-compliances in case of fund management y with the business is quite high. For example, during a Advertise roadshow, investors may seek information about ment past performance of the manager. Such Code as communications by the manager should not be specified considered advertisement. All forms of reverse in the solicitation should be exempted. Private placement Fifth and all communications with accredited investors Schedule should be excluded from the definition of of these advertisements.Regulati ons 177 Paragrap Request for Extension of V-CIP and Digital Background: h 5.4.3, Onboarding of Customers to Foreign Nationals The current provisions under paragraph 5.4.3, read read in under IFSCA AML/CFT/KYC Guidelines, 2022 in conjunction with PART-A of Annexure-II of the conjuncti IFSCA AML/CFT/KYC Guidelines, 2022, outline the on with procedures for Verification of Identity of Customers. PART-A Specifically, PART-A of Annexure-II provides of guidelines that allow Regulated Entities (REs) to Annexur onboard Indian Nationals using V-CIP or other e-II of the Digital processes. IFSCA AML/CF Issue: T/KYC FMEs in IFSCs are facing significant challenges in Guidelin onboarding foreign national clients due to the es, 2022 existing restriction that limits V-CIP and Digital onboarding exclusively to Indian Nationals. This limitation not only complicates the customer due diligence (CDD) process for FMEs but also hinders their ability to efficiently and compliantly tap into a broader, global client base. The inability to utilize V-CIP for foreign national’s forces FMEs to rely on more cumbersome, manual processes, which can delay onboarding, increase costs, create additional compliance risks, delay in pooling of money from investors etc. Request: In light of these challenges, we respectfully request the IFSCA to extend the provisions of V-CIP and Digital onboarding to foreign nationals. This extension would align with paragraph 5.4.3 read with PART-A of Annexure-II of the IFSCA AML/CFT/KYC Guidelines, 2022, and would significantly enhance FMEs’ ability to attract and onboard international clients without compromising on regulatory compliance. Allowing the use of V-CIP for foreign nationals would provide FMEs with a seamless, efficient, andcompliant method to verify customer identities while obtaining the necessary Officially Valid Documents (OVDs) as required by the guidelines. This relaxation would empower FMEs to expand their client base beyond India, tapping into global markets with greater ease and agility, and positioning the IFSCs as truly international financial hubs. We believe that extending V-CIP and Digital onboarding to foreign nationals will not only address the operational difficulties faced by FMEs but also foster a more inclusive and competitive financial ecosystem within the IFSC. Such a measure would enable FMEs to attract a broader range of clients, thereby contributing to the growth and success of the IFSC in the global financial landscape. 178 22(1), "Prior to deployment"... should also cover Clarity may be given for pre-allotment situations. N.A. 34(1), instances where the application money from the 46(1) investor/s has come but pending allotment of units. Such funds need to be temporarily invested till units are allotted to investors and funds deployed by the fund manager 179 32 (2) Contribution of at least 150000 $ should be Gross remittance by investor should be 150000 $ N.A. subject to adjustments for remittance charges, subject to certain business/transaction related stamp duty and set-fees/cost adjustment; it is good to provide this clarity. 180 35(4), 47 "Associates" should not cover the other schemes Such other schemes are professionally managed N.A. (5), managed by FME or its group entities. Otherwise for 3rd party investors. FME or its associate are not this would contradict with FoF structure the beneficiary of the corpus. 181 47 It may be explicitly clarified that the limits While AIF FoF will have more clarity with this N.A. mentioned will not be applicable in case of funds suggestion, it will also make it possible that a Retail of funds (FoF) structure, provided the underlying Fund may be launched as a FoF structure. portfolio fund is complying with the permissible investments norms and conditions of Reg 47182 7(2) and The consultation paper proposes reducing the The finance industry is inherently complex, requiring 7(4) experience requirement for the compliance a deep understanding of its various structures, officer role to three years, provided the individual processes, and markets to effectively justify the role holds a CS qualification or an equivalent of a compliance officer. Moreover, regulators are credential. continuously enhancing compliance requirements to prevent fraud, scams, and market manipulation In my view, the experience criteria should remain etc. Consequently, the compliance officer's role is unchanged. A five-year requirement is both crucial in safeguarding the organization against adequate and necessary to ensure the non-compliance. It is also worth noting that several compliance officer possesses the depth of major organizations have faced failures despite knowledge and expertise needed for the role. having numerous legal advisors. In such contexts, a three-year experience threshold is inadequate for grasping the intricacies of products, processes, structures, and markets. You may have also noted that many big organisations have failed even though they had number of legal advisors. In such scenario, the experience of three years is not sufficient to understand the products/ process/ structure/ markets. In my view, no academic degree can substitute for the value of hands-on experience and practical knowledge in the finance industry. I agree that SEBI has also suggested something similar on the domestic side but please note that it takes time to become compliance officer on the domestic investment manager side. In my experience, I have not seen any individual becoming compliance officer with three years of experience. I acknowledge that organizations are currently facing challenges in finding suitable candidates. However, this may be a temporary issue. As Gift City represents the first IFSC, the situation will improve with the establishment of additional IFSCs in the future. 183 7(2) In the regulation 7(2), it is mentioned that the FME is required to appoint additional KMP as Compliance and Risk Manager, responsible forcompliance with the regulations and ensure suitable risk management policies and practices at the FME. However, the same role is referred to as the Compliance Officer in other sections. To avoid confusion, IFSCA may consider amending the regulation to standardize the designation to a single title. 184 - We are very happy with IFSCA's efforts to enhance the ease of doing business and transform Gift City into a global finance hub. We are confident in Gift City's progress, thanks to IFSCA's dedicated and diligent work towards its success. On behalf of all our industry colleagues, I would like to extend our heartfelt thanks to IFSCA. 185 new "Provided that for the KMP provided under sub- Both the Institute of Chartered Accountants of India proviso regulation (2), the experience as provided above (ICAI) and Institute of Company Secretaries of India proposed shall be required for a minimum period of 3 years (ICSI) are premier institutes in India governing the for 7(3) if such KMP is a member of Institute of Company membership for CAs and CSs respectively. As such Secretaries of India, Institute of Chartered it would be a disservice to the members of one Accountants of India or any institution equivalent institute if relaxations were afforded to only one thereto in a foreign jurisdiction and has category of professionals experience in compliance or risk management in an entity regulated by a financial sector regulator or a listed company. 186 24(2) 24(2) The FME shall ensure that the portfolio There will ambiguity about the phrase "within 30 under the scheme and Net Asset Value (NAV) is days from the end of half-year". A defined number disclosed to the investors at least on a yearly of days from the end of the reporting period may basis within 210 days from the end of the offer more clarity reporting period for the relevant year187 26(2) Provided that the above requirement shall not Regulated scheme is not defined. The phrase apply in case of a fund of funds scheme investing "regulated by a financial sector regulator in India or in regulated scheme(s) regulated by a financial a foreign jurisdiction" has been used in Para 7 of the sector regulator in India or a foreign jurisdiction FM Regulations and the same should be used to or having managers subject to such regulations ensure that there us no ambiguity. Added another which are valued by any independent third-party phrase for situations wherein the Manager is service provider. regulated but not the Fund. This is pertinent from the perspective of foreign jurisdictions wherein the Manager is regulated instead of the Scheme 188 28(1)(b) (i) the FME and its associate (provided the The term "associate" should be restricted only to associate is investing in the Scheme), wherever those investing in the Scheme and not those who applicable, are not Indian resident and do not may be providing services or who are not investing have any Indian resident as their ultimate in the Scheme. This clarification is important to have beneficial owners; and to give clarity to non-resident FMEs looking to set up in GIFT IFSC, many of whom are part of a global set-up 189 35(1) 35 (1) In case of an open ended scheme, the Changing this from securities of unlisted companies maximum investment in unlisted securities of to unlisted securities will address the illiquidity risk unlisted companies should not exceed twenty- inherent in open-ended schemes. Unlisted entities five percent (25%) of the corpus of the schemes. are permitted to list securities on exchanges, which would have liquidity. This is similar to the change Para 22 and 34 of the FM Regulations 190 Provided that in case of an open ended fund of Changing this from securities of unlisted companies fund scheme, this requirement shall not be to unlisted securities will address the illiquidity risk applicable if such scheme is investing in other inherent in open-ended schemes. Unlisted entities open ended scheme(s) which shall not have are permitted to list securities on exchanges, which investment in unlisted securities of unlisted would have liquidity. This is similar to the change companies in excess of twenty-five percent Para 22 and 34 of the FM Regulations (25%) of their corpus. 191 36(3) 36 (3) The FME shall ensure that the NAV is There will ambiguity about the phrase "within 30 disclosed to the investors at least on a monthly days from the end of half-year". A defined number basis within 15 days from the end of month in of days from the end of the reporting period may case of an open ended scheme and half-yearly offer more clarity 210 days from the end of the reporting period for the relevant year in case of a close ended scheme.192 38(2) Provided that the above requirement shall not Regulated scheme is not defined. The phrase apply in case of a fund of funds scheme investing "regulated by a financial sector regulator in India or in regulated scheme(s) regulated by a financial a foreign jurisdiction" has been used in Para 7 of the sector regulator in India or a foreign jurisdiction FM Regulations and the same should be used to or having managers subject to such regulations ensure that there us no ambiguity which are valued by any independent third-party Added another phrase for situations wherein the service provider. Manager is regulated but not the Fund. This is pertinent from the perspective of foreign jurisdictions wherein the Manager is regulated instead of the Scheme 193 40(1) (i) the FME and its associate (provided the The term "associate" should be restricted only to associate is investing in the Scheme), wherever those investing in the Scheme and not those who applicable, are not Indian resident and do not may be providing services or who are not investing have any Indian resident as their ultimate in the Scheme. This clarification is important to have beneficial owners; and to give clarity to non-resident FMEs looking to set up in GIFT IFSC, many of whom are part of a global set-up 194 50(2) Provided that the above requirement shall not Regulated scheme is not defined. The phrase apply in case of a fund of funds scheme investing "regulated by a financial sector regulator in India or in regulated scheme(s) regulated by a financial a foreign jurisdiction" has been used in Para 7 of the sector regulator in India or a foreign jurisdiction FM Regulations and the same should be used to or having managers subject to such regulations ensure that there us no ambiguity which are valued by any independent third-party Added another phrase for situations wherein the service provider. Manager is regulated but not the Fund. This is pertinent from the perspective of foreign jurisdictions wherein the Manager is regulated instead of the Scheme195 7. (a) We suggest deleting: (a) Periodic certification examinations increase the E.g. Singapore does not require [Regardi (5) The employees of FMEs in IFSC shall compliance burden for FMEs, especially in examinations for funds that are not ng undergo such certification(s) from such comparison to other leading global jurisdictions (e.g. focused on retail investors (link) KMPs] institution(s) as may be specified by the USA, Singapore etc.) that IFSC benchmarks itself Authority. against. (b) We request lowering the minimum (b) It is currently proving quite difficult for FMEs to experience to 3 years for KMPs meeting the find quality KMP talent that can permanently be other requirements, rather than just for members based in GIFT IFSC. We are often forced to turn of Institute of Companies Secretaries of India down highly talented individuals because they might (“ICSI”). not exactly fit the specific requirements laid out (c) Including National Institute of Securities (even if they might do the job capably, in actuality). Market (“NISM”) (or an IFSCA equivalent While we agree with the spirit of the qualification and institution) where professionals can take experience thresholds that are in the regulations examinations and procure eligibility (particularly over the medium / long term as the certifications. jurisdiction takes off), we request some short-term relaxations (especially those which do not materially impact safeguards). E.g. it is generally accepted that clearing the membership for the Institute of Chartered Accountants of India (“ICAI”) is more difficult than that of the ICSI. Perhaps, the lower level of 3 years’ experience could be applied more widely across the board for all KMPs for a certain number of years; or a distinction could be made between KMPs itself – e.g. if 1 of Principal Officer or Compliance & Risk Manager is >5 years, then the other KMP(s) could be >3 years. These relaxations could be timebound and could be done away in a glide path over the next say 3-5 years by which time the jurisdiction taking off would have significantly increased the qualified talent pool. (c) Allowing examination-based certification will significantly increase the talent pool for KMP requirement. E.g. if an FME finds a highly talented individual who falls short on a particular qualification (e.g. no Master’s degree), then FMEs would have the flexibility to hire such individuals with the knowledge that they can take on KMP roles as and when they clear NISM type certifications.196 132 We suggest removing the requirement that only Several leading jurisdictions in the world provide E.g. Dubai Financial Services an IFSC-based custodian should be appointed. exemptions to non-retail funds from having Authority – eligible custodian not Currently the exemption to appoint non-IFSC custodians. While the IFSC requiring custodians to required for exempt fund (link) - custodians is provided only in cases where the be appointed for open ended restricted schemes is https://www2.deloitte.com/content jurisdiction of end securities issuance disallows appreciated from a safeguard perspective, /dam/Deloitte/sg/Documents/tax/s custodians from outside that jurisdiction. We mandating an IFSC-based custodian has significant g-tax-fund-management-in- suggest broadening this exemption to other cost implications, particularly for funds investing into singapore-15-sep-2021.pdf situations, especially (2) open ended restricted globally listed securities. Based on the quotes we schemes; and (3) All other schemes managing have procured thus far, appointing an IFSC-based AUM above USD 70 million. custodian for globally listed securities would materially increase fund operating expenses for our investors vs. the offshore (US-based) custody option that we utilize currently. 197 7 The proposed changes introduce this proviso to Members of ICSI and equivalent institutions are Many international jurisdictions reduce the experience required for the KMP to 3 recognized for their rigorous training and have similar or even lower years from the present 5 years if the said person professional standards. Reducing the experience experience requirements for if such KMP is a member of Institute of Company requirement acknowledges their expertise and comparable roles. Aligning the Secretaries of India or any institute equivalent readiness to take on KMP roles earlier in their Indian regulations with these thereto in foreign jurisdiction. careers. standards can make the Indian financial sector more competitive We propose that this proviso should either be Simplifying the requirements for KMPs can reduce and attractive to global talent. extended to include other professional administrative burdens and make it easier for qualifications as specified in the consultation companies to comply with regulations. This can paper or to be kept as per the current enhance the overall business environment and regulations. encourage more firms to operate within the regulatory framework. 198 9(2)(b) A person is not considered "fit and proper" if: The disqualification on mere filing of charge sheet A charge sheet has been filed against such would be against the principles of innocent until person by any enforcement agency in matters proven guilty. Further, this would not in line with concerning economic offenses and is pending. SEBI regulations which have been mentioned as Such as disqualification should come into effect being the practice followed by SEBI in the rationale only if the person is found convicted of the matter mentioned in the Annexure and therefore, should be concerning economic offenses. removed.199 31(1) Registered FMEs may launch restricted Green Channel should be streamlined in such a way schemes through a private placement by filing that even if the fund does not have the Letter of the placement memorandum with the Authority Authorisation (LOA), it could get the bank account along with the application fees in the manner as open as bank account is the first step for any fund specified by the Authority in this regard. before they commence the road shows. Currently, banks are declined to open the bank account until We propose to crystalize the Green Channel in IFSCA issues LOA. In case of Green Channel, there order to rationalize the license process. should be some mechanism where the applicant receives the LOA immediately upon filing of an application with the authority. 200 35(2) The minimum size of the restricted schemes In the case of open ended funds, it is impractical to There are no minimum corpus shall be USD 3 Million. maintain the minimum corpus criteria as the AUM is criteria applicable in the popular completely market driven and hence, there could be foreign jurisdictions like Singapore Criteria to maintain minimum corpus should be chances of non-compliance. and Mauritius. While we are done away. observing the GIFT IFSC with In the case of close ended funds, it is difficult to other global jurisdictions, this will commence the fund operations until the criteria are give boost to the fund managers to met. Lowering the size will not rationalize practical quickly commence the fund challenges. operations. 201 36(3) The FME shall ensure that the NAV is disclosed Valuing the underlying assets of the master fund In Singapore, the deadline for to the investors at least on a monthly basis within and subsequently the feeder fund within a 30-day releasing the Net Asset Value 15 days from the end of month in case of an open timeline from the end of the half-year period is (NAV) for feeder funds typically ended scheme and half-yearly within 30 days challenging. This difficulty arises particularly when within a reasonable timeframe from the end of half-year in case of a close physical assets need to be valued, which can be after the valuation date, within 30 ended scheme. We propose to relax the time-consuming. days. timelines in case of feeder fund structures. Additionally, if the master fund releases its NAV on the last day, the feeder fund may struggle to Also, SEBI insists to carry out the determine its NAV in a timely manner. Therefore, in valuation on half-yearly basis. such cases, funds should be expected to release However, it has not prescribed any their NAV within a reasonable timeframe after the particular timeline. valuation date, within 30 days. 202 77(1) A FME shall not accept from the client, funds or Inbound PMS from GIFT IFSC is very unlikely due securities worth less than USD seventy-five to various operational challenges like FPI thousand (75,000) in case of a portfolio implications, tax opacities. In case of outbound management agreement. PMS, portfolio managers may attract resident Indians including corporates to invest abroad We propose to keep the minimum ticket size to through PMS setup in GIFT IFSC. USD fifty thousand (50,000). For resident Indians, The LRS limit of USD 250,000per financial year restricts the amount resident Indians can invest abroad, posing a significant barrier for high-net-worth individuals looking to diversify their portfolios internationally. Setting a minimum ticket size of USD 50,000 for PMS can help rationalize offshore investment opportunities. This would allow investors to make more substantial investments without quickly exhausting their LRS limit. 203 132 The FME shall appoint an independent In case of the feeder fund structures, there is no In Singapore, the appointment of a custodian to carry out the custodial services at asset to custodies. There is no buy or sell trades per custodian is generally required for least for the following schemes:- se from a transaction perspective. To appoint a feeder fund structures, especially (1) Retail schemes; custodian in such case involves operational muddle under the Variable Capital (2) Open ended restricted schemes; and as well as the cost. Even the custody service Companies (VCC) framework. (3) All other schemes managing AUM above providers do not have any clarity as to what to USD 70 Million. custody in case of feeder fund structures. In fact, SEBI has mandated that AIFs must allot units in We propose to relax the criteria to appoint a While we recognize this jurisdiction as cost- dematerialized form. Feeder funds custodian in case of feeder fund structures. competitive compared to others, certain costs investing in unlisted assets can undermine this advantage. Therefore, we propose hold the units received from the relaxing the criteria for appointing a custodian in master fund in their demat feeder fund structures. accounts. Since these units are illiquid, maintaining them in a demat account should suffice.204 The present fees charged for registration of an The fees should be brought in line with other FME being as follows regulators specifically SEBI which only charges a Authorised - USD 7,500 fee as follows: Registered (Non-Retail) - USD 10,000 Registered (Retail) - 12,500 Cat I - INR 500,000 Cat II - INR 1,000,000 Additionally each FME bears a recurring fee of Cat III - INR 1,500,000 USD 2,000. Additionally, these Fees should in fact be further Further, each scheme of the FME is charged a subsidised in order to encourage greater one time fee of - participation by funds within the IFSCA in order to Cat I - USD 7,500 promote growth withing the ecosystem. Cat II & Cat III (Non-Retail)- USD 15,000 Cat III (retail) - USD 22,500 Also, setup cost in other jurisdictions like Singapore, Mauritius is quite lesser as compared to GIFT IFSC. It is our request that in order to further facilitate It’s not all about the comparison rather a significant ease of doing business, the fees should be element to attract more fund managers to setup rationalised to be brought in line with popular their shops in GIFT IFSC. international jurisdictions. 205 Platforms should allow to invest in GIFT IFSC Current fund management regulations only permit based funds and for seamless onboarding, portfolio managers to accept investments from the PMLA should be revisited. platforms. However, the regulations are silent for restricted schemes. Current PMLA and rules thereon, restrict platforms to onboard as an investor to GIFT IFSC based funds. Criteria with respect to identification of beneficial owners need to be revisited and redefined to permit the funds to onboard platforms seamlessly. 206 19(3) We welcome the period of validity of the The 12 month period is in line with SEBI (AIF) placement memorandum being extended to Regulations. To make the 12 month period twelve (12) months from the earlier six (6) prospective, it could be made effective from the date months. However, for existing venture capital the proposed amendment comes into effect. schemes, we request you to kindly consider the twelve (12) months period to commence from the date of the amended regulations coming into effect.207 20(2) We welcome the introduction of the third and Considering the minimum investment amount for fourth proviso, wherein the minimum investment the specified joint investors is in line with the existing amounts of joint applicants has been clarified. SEBI (AIF) Regulations. 208 23(1) We welcome the reduction in minimum size of the corpus in case of venture capital schemes to USD 3 Million, from USD 5 Million earlier. 209 23(4) We request you to consider the option of Investors who are members of such committees are obtaining the prior approval of an Investor representative of the other investors in the scheme Advisory Committee ("IAC") or Limited Partner and one of the objectives of such committees is to Advisory Committee ("LPAC") or seventy-five ensure investor's interests are taken care of and to percent (75%) investors in the scheme by value. avoid or mitigate conflicts of interest, amongst other things. 210 24(2) The language "at least on a yearly basis within To avoid any confusion due to interpretation. 30 days from the end of half-year" could be replaced with "at least on a yearly basis within 6 (or 7) months from the end of the financial year". 211 3(4)(a) - IFSCA may consider clarifying whether it shall be FIF has been defined as a self-managed fund Authoris now mandatory for a family investment fund pooling money only from a single family. Further, ed FME (‘FIF’) to set up a separate FME distinct from the regulation 3(4)(a) of the existing FME Regulations FIF or whether FIF itself can obtain registration states that FIF shall also seek registration as an as fund as well as authorised FME. Authorised FME. However, as per the proposed change in regulation 3(4)(a), a FME set-up by a single family to create or manage their Family Investment Fund shall seek registration as an Authorised FME. Given the proposed change, a dichotomy may arise whether FIF is now mandated to set up a distinct FME which shall obtain registration as an Authorised FME. It is therefore recommended that IFSCA may issue appropriate clarification.212 Currently, in case of funds set up in IFSC GIFT Obtaining SEZ registration for each scheme floated City as a trust with multiple schemes floated under umbrella trust is increasing burden for fund under the trust, both trust as well as schemes are managers, adding compliances as well as delay in required to obtain SEZ registration. setting up and implementation of muti-scheme structure in IFSC GIFT City. It is recommended to dispense with need to obtain separate SEZ registration for each This recommendation has been proposed in scheme (as required under current framework) if furtherance of IFSCA’s agenda to promote Ease of umbrella trust has obtained Doing Business in IFSC GIFT City. SEZ registration. Further, it is recommended that the GST benefit may also be extended to all the schemes floated under trust since umbrella trust has obtained SEZ registration. 213 IFSCA may consider reducing the fees The fees currently prescribed by IFSCA is higher prescribed (vide Circular dated May 17, 2023) for compared to regulatory fees in some of the offshore FMEs and funds / schemes set up in IFSC. jurisdictions. This shall make IFSC GIFT City a competitive jurisdiction for fund managers. 214 Personal income-tax benefits may be accorded This move shall incentivize employees to migrate / to employees of FMEs taking up employment / take up employment in IFSC-GIFT City. migrating to IFSC-GIFT City. 215 7 a) To consider revising the certification Via the consultation paper, it has been proposed Extracts from SEBI AIF regulations requirement only for the principal officer (“PO”) that the employees of Fund Management Entity for reference: and compliance officer (“CO”) and not for all the (“FME”) in International Financial Services Centre employees of the FME. (“IFSC”) shall obtain a certification from institution(s) “4 (g) The key investment team of as may be specified by International Financial the Manager of Alternative b) To consider adding flexibility in the experience Services Centre Authority (“IFSCA”). While we Investment Fund has - criteria of the CO and consider the below: understand that the intention behind the proposed (i) at least one key personnel with “Provided that for the KMP provided under amendment is to ensure that employees of the FME relevant certification as may be subregulation (2), the experience as provided are adequately equipped with the relevant skill set specified by the Board from time to above shall be required for a minimum period of and are updated with the latest regulatory time.” 3 years if such KMP is a member of Institute of developments, it is primarily the responsibility of the ……………. Company Secretaries of India or any institution PO and CO, to ensure the compliance with the equivalent thereto in a foreign jurisdiction and prevailing regulatory regime applicable to the FME. Provided that the requirements as has experience in financial services entity or has Thus, requiring certifications for all the employees specified in regulation 4(g)(i) and been part of compliance or risk management in including those at the junior level could imposean entity regulated by a financial sector regulator significant operational challenges for the FME. 4(g)(ii) may also be fulfilled by the or a listed company.” Mandating certification for every employee could same key personnel.” further hinder the recruitment efforts and c) In addition to the above suggestions, the appointment of capable candidates for an FME. existing experience criteria of the PO which is 5 years can also be reduced to 3 years in line with Further, we note that the IFSCA has proposed the the above CO experience criteria. experience criteria of 3 (three) years for the COs if they are the member of Institute of Company Alternative suggestion: The experience criteria Secretaries of India or any institution equivalent applicable to the PO and CO may be considered thereto in a foreign jurisdiction and has experience to be altogether removed and an alternative in compliance or risk management in an entity eligibility criteria may be introduced such as such regulated by a financial sector regulator or a listed individual/s clearing NISM certification courses, company. specifically designed for IFSC regulatory regime. While we understand that this proposal is to relax the eligibility criteria for the CO and allow effective utilization of resources and rationalize the cost of operations for FME in the IFSCA. However, getting an experienced resource in IFSC is currently a challenge and hence it is proposed that IFSCA may consider alternative eligibility criteria for PO and CO to encourage ease of business. Further, it is submitted that such alternative arrangements (like an exam requirement as an option to meet eligibility norms) may provide flexibility to the FME entities to engage appropriately qualified professionals. 216 9 To consider reducing the proposed five-year IFSCA has proposed to revise the timeline for disqualification period to the original three year declaring a person as “fit and proper” after the period to enhance ease of doing business within expiration of the period mentioned in the order the IFSC. passed by a regulatory authority. At present, under the IFSCA (Fund Management) Regulations, 2022 (“FM Regulations”), an entity is restricted from being considered as a 'fit and proper' for a duration of 3 (three) years following the expiration of the validity of such a regulatory order. It has been proposed under the consultation paper that a timeline of 5 years from the date of such order is prescribed incase no specific period is given in such regulatory order. We understand that the proposed alignment of the ‘fit and proper’ provisions with the timelines specified in the order is based on the ‘principle of proportionality.’ However, the suggestion to extend the disqualification period to 5 (five) years in cases where no specific timelines are provided, is not in the best interest of the person against whom such order has been passed by the regulatory authority. Generally, in the recent orders passed by the SEBI, it has been observed that the person is barred for maximum period of 1 (one) year from the securities market and considering the current timeline given in extant regulations, the person would not be considered as fit and proper for a total of 4 (four) years from the date of such order. However, with the proposed amendment, in case no period is mentioned in the order, then such person shall be barred for a total of 5 (five) years from the date of such order. This may create substantial challenges for market participants seeking to enter or operate within the IFSC framework. With the intent of IFSCA’s ongoing efforts to develop a competitive regulatory regime with other developed jurisdictions, IFSCA may consider relaxing the proposed 5 (five) year disqualification period and making it similar to the original 3 (three) year period to enhance the ease of doing business within the IFSC.217 19(3) To consider reducing the scheme filing fee, IFSCA has proposed via the consultation paper, to limiting it to concessional rates in case if the FME extend the validity of placement memorandum from fails to declare the first close within the stipulated 6 (six) months to 12 (twelve) months from the date timeframe provided under the FM Regulations of its filing with IFSCA, and additionally provided for ease of doing business perspective. that on failure of the FME to declare first close of the scheme by achieving the minimum corpus provided under the FM Regulations within the stipulated timeline of 12 (twelve) months, the FME would be required to refile the placement memorandum by paying the full fee as applicable to the scheme. While we understand and appreciate the IFSCA’s intent to align these provisions with SEBI’s framework (which prescribe a timeline of 12 (twelve) months for first close of the scheme, failing which AIF is required to file a fresh application with SEBI by paying full fee as applicable on filing of a new scheme), unlike SEBI which permits a lower fee of INR 1,00,000 for launching a new scheme, the IFSCA’s fee’s structure for scheme filing is considerably high (i.e., USD 7,500, USD 15,000 and USD 22,500 as applicable). In this regard, we request that IFSCA may consider reducing the application fee for refiling of scheme, limiting it to concessional rates in case the scheme fails to declare the first close within the stipulated timeline.218 28(1) To consider removing the 33% (thirty three IFSCA has proposed to remove the 10% (ten percent) limit for percent) ceiling provided under the FM Regulations investing in an investee company and to enhance the contribution from FME or its associates of such company in the proposed associates in the schemes wherein neither the amendment. ultimate beneficial owners of FME nor its associates are Indian residents and even do not have any Indian residents. However, this relaxation has been subjected to an additional safeguard, notably for such scheme, not more than 33% (thirty three percent) of the corpus has been invested in an investee company and/or associate of such company. Under the current Indian regime, several restrictions, limitations and conditionalities are applicable on foreign investments in India. Therefore, keeping an additional limit of 33% (thirty three percent) would not achieve the objective of ease of doing business. Additionally, we have not seen such stringent limits being provided in any developed jurisdiction like Singapore, Mauritius or Dubai. 219 31 To consider reducing the scheme filing fee, IFSCA has proposed via the consultation paper, to limiting it to concessional rates in case if the FME extend the validity of placement memorandum from fails to declare the first close within the stipulated 6 (six) months to 12 (twelve) months from the date timeframe provided under the FM Regulations of its filing with IFSCA, and additionally provided for ease of doing business perspective. that on failure of the FME to declare first close of the scheme by achieving the minimum corpus provided under the FM Regulations within the stipulated timeline of 12 (twelve) months, the FME would be required to refile the placement memorandum by paying the full fee as applicable to the scheme. While we understand and appreciate the IFSCA’s intent to align these provisions with SEBI’s framework (which prescribe a timeline of 12 (twelve) months for first close of the scheme, failing which AIF is required to file a fresh application with SEBI by paying full fee as applicable on filing of a new scheme), unlike SEBI which permits a lower fee ofINR 1,00,000 for launching a new scheme, the IFSCA’s fee’s structure for scheme filing is considerably high (i.e., USD 7,500, USD 15,000 and USD 22,500 as applicable). In this regard, we request that IFSCA may consider reducing the application fee for refiling of scheme, limiting it to concessional rates in case the scheme fails to declare the first close within the stipulated timeline. 220 35(3) To consider removing the 25% limit on all the We request IFSCA to remove such restrictions on a fund of fund schemes. fund of fund scheme rather than providing exceptions only for Open ended scheme since an open-ended scheme may invest in open ended as well as close ended schemes. Further, various jurisdictions also allow open ended schemes to invest in close ended schemes with no such restriction and hence, such limitations would restrict the market participants to create a fund of fund schemes in IFSC.221 35(2) To consider removing the minimum size criteria IFSCA has proposed to reduce the size of the for fund of funds scheme acting as a feeder fund restricted scheme (non-retail) to USD 3,000,000 and solely investing in the master fund. (United States Dollars Three Million) from USD 5,000,000 (United States Dollars Five Million). We understand that such move is being taken to attract the market participants who are facing challenges in launching the schemes with such corpus size. Hence, to enhance the competitiveness of IFSC and align its regulatory framework with the practices of other mature jurisdictions, it is recommended that IFSCA may consider removing the proposed minimum corpus requirement of USD 3,000,000 (United States Dollars Three Million) provided under the FM Regulations, for the fund of fund schemes. Further, it may be noted that as per Regulation 40(4)(c) of the FM Regulations, a fund management entity's minimum capital contribution in a scheme shall stand exempted if it invests in a scheme, which is a fund of fund scheme, investing in a scheme with similar requirements. A corollary may be drawn to the minimum corpus requirements of the fund established in IFSC, which seeks to invest solely in the master fund, and the master fund already complies with a similar minimum corpus requirement. Therefore, we humbly request IFSCA to grant a relaxation from complying with this requirement of minimum corpus before making investments in the master fund, under Regulation 144 (2) of the FM Regulations for the fund of fund scheme, investing in a scheme with similar requirements.222 40(1) To consider removing the 33% limit for investing IFSCA has proposed to remove the 10% (ten in an investee company and associates of such percent) ceiling provided under the FM Regulations company in the proposed amendment. to enhance the contribution from FME or its associates in the schemes wherein neither the ultimate beneficial owners of FME nor its associates are Indian residents and even do not have any Indian residents. However, this relaxation has been subjected to an additional safeguard, notably for such scheme, not more than 33% (thirty three percent) of the corpus has been invested in an investee company and/or associate of such company. Under the current Indian regime, several restrictions, limitations and conditionalities are applicable on foreign investments in India. Therefore, keeping an additional limit of 33% (thirty three percent) would not achieve the objective of ease of doing business. Additionally, we have not seen such stringent limits being provided in any developed jurisdiction like Singapore, Mauritius or Dubai.223 7 To consider eliminating the current requirement Under the extant regulations, any change in KMP of of obtaining consent from IFSCA for change in a FME (including the PO and CO) registered under key managerial personnel (“KMP”) of the FME the FM Regulations requires prior approval from the set up in IFSC. IFSCA, accompanied by a fee of USD 250 (United States Dollars Two Hundred and Fifty), as outlined in Schedule II of the May 2023 Circular referred in the preceding column. Due to lack of manpower in the IFSCA and intense competition between various FMEs established in IFSCA inter-se, we have witnessed scenarios, where such KMP have resigned from the FME within few days of FME getting approval from the IFSCA or launching the schemes, thereby leaving the FME without adequate manpower to run its activities. While there should be adequate checks and balances for such FMEs to appoint these KMP as soon as possible, additional safeguard like prior permission from the IFSCA for effecting such change in KMP should be reconsidered. It is important to note that the roles of the KMP of a FME are comparable to those of the key investment team members of an investment manager. Our suggestion given in the above paragraph are in line with the extant SEBI regime (as provided under the SEBI (Alternative Investment Funds) Regulations, 2012, where only intimation to SEBI and investors is required for changes in the key investment team. The aforesaid provisions of the SEBI Master Circular for Alternative Investment Funds dated May 07, 2024 is reproduced below for your reference: “13.1.2. For the purpose of provisions of AIF Regulations, ‘key management personnel’ shall mean: (i) members of key investment team of the Manager, as disclosed in the PPM of the fund; (ii) employees who are involved in decision makingon behalf of the AIF, including but not limited to, members of senior management team at the level of Managing Director, Chief Executive Officer, Chief Investment Officer, Whole Time Directors, or such equivalent role or position; (iii) any other person whom the AIF (through the Trustee, Board of Directors or Designated Partners, as the case may be) or Manager may declare as key management personnel. 13.1.3. AIFs shall disclose the names of all the key management personnel of the AIF and Manager as specified in para 13.1.2 above, in their PPMs. Any change in key management personnel shall be intimated to the investors and the Board.” In light of this, we respectfully suggest that IFSCA may consider revisiting the approval requirement for change in KMP of the FME.224 22 To seek clarification as to whether (i) the funds Although, through consultation paper, IFSCA has set up under the FM Regulations could engage proposed the clarification on the jurisdiction of these in warehoused investments and (ii) the FME permitted investments, no clarity has been provided incorporated in IFSC could carry out proprietary as to whether the FME can (i) make the warehoused trading, with appropriate disclosures to investors investments, and (ii) carry out proprietary trading, of the funds in the private placement with appropriate disclosures to investors of the memorandum. funds as provided in the private placement memorandum. Warehousing and proprietary trading are important for FME to tap on capitalization of market opportunities. Warehousing allows the FME to secure assets at advantageous prices, thereby mitigating the risk of price volatility before the assets are incorporated into the fund. The lack of explicit regulatory guidance on these investment strategies can potentially impact FME’s operational efficacy. It is, therefore, imperative that IFSCA, provide unequivocal guidelines regarding the permissibility of warehousing investments and proprietary trading by FMEs. Such regulatory clarity would ensure that all FMEs operate within a uniform framework, thereby enhancing transparency and safeguarding investor interests.225 31 To consider providing a timeline for filing the Under the extant FM Regulations, any material revised placement memorandum in case of any changes in the information of the PPM should be material change in the information provided in immediately informed to the IFSCA by the FME. the placement memorandum. This is onerous provisions, as during the fund raising, due to the negotiations with the investors, PPM undergoes a lot of changes and filing a revised PPM immediately after the changes is made is creating operation havoc for the FME. Reference can be taken from the SEBI (AIF Regulations), 2012 which provide that changes in the information in the PPM and other terms of the fund document can be submitted within 1 month from the end of each financial year. Hence, we request IFSCA to provide a certain timeline within which such changes in the information provided in the PPM should be filed by FME with IFSCA. 226 41 To consider providing necessary framework for Under a segregated portfolio structure, a FME co-investment by funds through a SPV. Also, to under a single scheme it manages, may create consider providing necessary framework for segregated portfolios such that the assets and allowing segregated portfolio for different liabilities of each portfolio are legally separate from investors through SPV. the assets and liabilities of any other portfolio and from the general assets and liabilities of the FME. Additionally, IFSCA may consider applying a In this regard, IFSCA till date has not issued concessional fee for co-investments made necessary guidelines for co-investment under the through an SPV, considering that such SPV model mentioned in the FM Regulations. investments shall be encompassed within the restricted scheme. While the existing FM Regulations allow a restricted scheme to co-invest through segregated portfolio by issuing a separate class of units, while ensuring that the terms of investment of co-investment for such segregated portfolios are similar to the investment made by the common portfolio of the restricted scheme, thus, ensuring that a FME does not provide preferential opportunity to such segregated portfolio, however recently we were given tounderstand that the same shall be allowed provided the fund is also investing alongside the said co- investment class of units. Further, various jurisdictions also allow the investors to subscribe to separate classes of SPV model and make investment in specific set of portfolio entities, if so desired. A relevant example of the use-case of such segregated portfolio by means of separate classes is as follows: overseas FPI vehicles sometimes choose to have different classes available for subscription by Indian resident and non-resident investors respectively. This is because such FPI vehicles want to ensure that Indian resident investors only have exposure to the global portfolio, and not the Indian portfolio, to avoid any FEMA related complications. Therefore, IFSCA may consider enabling necessary provisions to allow the above. Further, we humbly request that IFSCA may consider applying a concessional fee for co-investments made through an SPV, considering that such investments shall be encompassed within the framework of restricted scheme.227 No It is our recommendation to permit funds in IFSC This model has also been promoted by Hon’ble express to issue primary and secondary classes of units Finance Minister Nirmala Sitharaman, in both the prohibitio wherein distributions to the holders of the Union Budget 2022 and in Union Budget 2024, n on secondary class units are made only after the which advocates the blending of (concessional) issuance obligations towards the holders of the primary capital to increase the amount of private capital of class units are met. To protect the interest of the invested in various sectors, such as high impact primary investors, the following safeguards can be climate and sustainable development focused and introduced: (i) the distribution model should be businesses and innovations. Such models are secondar expressly disclosed in the PPM; and (ii) only permitted in various other global jurisdictions as y classes institutional investors or accredited investors well. For instance, the U.S. Court of Appeals (Fifth of units to should be permitted to subscribe to the Circuit of New Orleans) has rejected the Securities the secondary class units. and Exchange Commission’s (“SEC”) ‘Private Fund investors Advisers Rule’ (“Rule”) which among other . restrictions intended to stop giving some investors preferential treatment over redemptions and preferential information about portfolio holdings. The Court held that such rules weren’t necessary for the “highly sophisticated” investors and such strictures should not be applied for private funds. Other offshore jurisdictions (such as Singapore) permit a similar payout model too, as long as its appropriately disclosed and all the investors are aware of the same (including commercial implications of such arrangements on different set of investors), at the time of their onboarding. Therefore, IFSCA may consider permitting such structures in IFSC. 228 36 (3) 36 (3) The FME shall ensure that the NAV is Calculation of NAV is an extensive and time- disclosed to the investors at least … and half- consuming process, whose timeline is dependent yearly within 60 days from end of the half-year in on several aspects including, but not limited to, case of a close ended scheme finalisation of financial statements by each portfolio company and valuation of the underlying private market security by a third party valuer. Valuation of securities held by private market schemes is time consuming and typically takes longer due to delays in finalisation of financial statements at portfolio company level, structural nuances of the underlying portfolio securities, lack of readily available market benchmarks etc.Given the above, we request the Authority to consider extending the timeline of disclosing the NAV to investor from 30 days to at-least 45 days (if not 60 days) from the end of half-year in case of a close ended scheme. 229 7 (3) In case of Registered FME (Retail) and other Currently, the Registered FME (Non-retail) is - FMEs that are managing an (‘AUM’) of at least required to appoint the below mentioned 2 KMPs: USD 1 billion 1. Principal officer - responsible for overall activities (a) Existing Regulations: As per regulation 7(3) of the FME including but not limited to fund of the IFSCA (Fund Management) Regulations, management, risk management and compliance; 2022 (‘FME Regulations’), Registered and FME(Retail) is required to appoint an additional 2. Compliance officer - responsible for compliance Key Managerial Personnel (‘KMP’) who shall be with regulations and ensure suitable risk designated with the responsibility of fund management policies and practices at the FME. management, in addition to Principal officer and Compliance officer. (b) Proposed amendment as The proposed amendment shall mandate per the Consultation paper: seeks to extend the Registered FME (Non-retail) managing an AUM of requirement of appointing additional KMP to at least USD 1 billion, to appoint an additional KMP other FMEs managing AUM of at least USD 1 with the responsibility of fund management, which billion at the close of the financial year. shall lead to substantial operational and financial (c) Suggestion/ recommendation: To enhance challenges to such FMEs. Currently, FMEs face the ease of doing business, we request your considerable difficulties in recruiting 2 KMPs, due to goodself to kindly consider (i) stringent minimum educational qualification and 1. Not extending the requirement to appoint an experience requirements, and (ii) lack of sufficient additional KMP for Retail and Non Retail FME talent pool in the IFSC zone. Adding an additional 2. There should be clarity w.r.t calculation of KMP with the necessary educational qualification AUM whether it would be computed basis and experience requirements would enhance these commitment raised/fund raised/total value of challenges and result in significant financial and investment. operational strain on such FMEs. 3. Time period for appointment of additional KMP for managing an AUM of at least USD 1 Billion Registered FME (Non-retail) do not deal with retail should be within 1 year from the date of circular money and have limited investors and larger ticket or within 6 months from the end of financial year size, which simplifies fund management processes where AUM is crossing USD 1 Billion. and involve lesser risk. These FMEs have 4. Certification requirement should not be successfully managed their operations and implemented for next 2 years complied with regulatory requirements with only 2 KMPs. You may also note that the requirement of having adequate resources (minimum of 2 resources withrequisite qualification and expertise) is globally accepted and prevalent in popular fund jurisdictions such as Mauritius and Singapore. However, it seems that regulatory requirement to appoint additional person based on AUM is not prevalent in the aforesaid popular fund jurisdictions. Accordingly, we request your goodself to consider relaxing this requirement of appointing additional KMP from an ease of doing business perspective. Further, such relaxation shall reduce undue operational and financial pressures. Your goodself will appreciate that this will reduce undue financial and operational pressures on Registered FME (Non-retail), while still supporting effective regulatory compliance. For Registered FME (Retail), There is no such requirement to add another KMP if assets cross 1 bn. 1. Clarity w.r.t AUM of fund management activity will help AUM computation practice same across the fund management industry in IFSC. Alternatively it should exclude FOF/ Feeder Fund AUM in this computation. 2. FME should have reasonable time period to appointment additional KMP for managing AUM, as it would be difficult to get such KMP with requisite qualification / experience of managing AUM within3 months. 3. Certification requirement will become obligatory on FME, if implemented on an immediate basis, especially when persons to be appointed have professional qualifications like CA/CS/CFA/FRM and are from relevant industry experience. 4. Additionally, we would like to suggest that application for appointment of KMP (PO/CO/additional KMP) should be cleared in fast- track manner where such person already have been designated as PO/CO/additional KMP in his/her previous organization within IFSC with the approvalof IFSCA. Alternatively the limit should be increased to USD 2 Billion 230 7(4)(b) Minimum experience requirement for the role of The minimum period of experience for the role of - Principal Officer Principal Officer is 5 years in related activities in the (a) Existing Regulations: KMPs of FME are securities market or financial products including in a required to have minimum 5 years experience in portfolio manager, broker dealer, investment related activities in the securities market or advisor, wealth manager, research analyst or fund financial products. management. (b) Suggestion/ recommendation: It is suggested Consultancy experience (such as experience in Big to include consultancy experience (such as Four firms), in areas related to the securities market experience in Big Four firms) of not more than 2 or financial products —such as due diligence years (in the aforesaid 5 years period), in services or transaction advisory services, equips activities related to the securities market or the Principal Officer with an experience that is financial products – such as due diligence comparable to the roles in portfolio management, services or transaction advisory services. brokerage, investment advisory, wealth management, research analysis, or fund management. Accordingly, we suggest your goodself to kindly consider including the consultancy experience (such as experience in Big Four firms) of not more than 2 years, in activities related to the securities market or financial products – such as due diligence services or transaction advisory services 231 Regulati (b) such person has not incurred any of the We understand the disqualifications criteria are - on 9 following disqualifications –(i) ………….. (ii) related to natural person whereas one of the ……………(iii) an order for winding up has been disqualification is related to winding up order passed against the person for malfeasance; against such person. Whereas there cannot be Recommendation: (iii) above can be deleted as order of winding up against the person but against there cannot be order of winding up against the entities like Company, LLP etc. Hence, the said person but only against entities like Company, disqualification is not relevant for individual person. LLP etc 232 17(4) Clause related to taking prior approval for Currently, in AIF Regulations (SEBI) there is no - appointing any KMP in IFSCA entity viz Principal requirement to take prior approval for the Officer & Compliance Officer should also be appointment of a Key Investment Team member. omitted if appointed in line with these provisions Accordingly, prior approval requirement while qualification/ eligibility requirements appointment of KMPs should also be removed.233 25 Borrowing Some key areas should also be identified as part of - (c) The FME intending to employ employing the framework which can help in drafting and leverage shall have a comprehensive risk implementing appropriate framework management framework appropriate to the size, complexity and risk profile of the fund. - Word fund to be replaced with the word Scheme and Some key areas should also be identified as part of the framework 234 31 31(1) A Registered FMEs may launch restricted Since now the approval shall be through green - schemes through a private placement by filing channel, the application shall be approved/ the placement memorandum with the Authority responded within 5 days. Accordingly, some along with the application fees as specified by timeline shall be provided for IFSCA to provide the Authority before twenty-one (21) working comments otherwise delay in comments from days of launch of the scheme in the manner as IFSCA and inclusion of those comments after specified by the Authority in this regard and the onboarding of investors, may lead to difficulties in application in regard shall be approved/ fund raising process. responded within 5 days. 235 32 (2) a) When aggregate investment by Joint a) To remove this clause or reduce the limit for joint - Investors is also at least USD 150,000; no investment relevance for Joint investments? b) This will give better clarity for investment by b) Provided that in case of investors who are employees Directors/ Designated Partners. Also employees or directors or designated partners or joint holders should only be relatives else it partners of the FME, the minimum value of becomes difficult to monitor investment shall be USD 40,000-should be with relative of employee or any entity which is set up for the benefit of employees Provided further that the following individuals/ employees, not more than 2, when act as joint investor, the aggregate investment by such individuals shall be at least USD 150,000: (i) An investor and his/her spouse (ii) An investor and his/her parent (iii) An investor and his/her daughter/son *Joint holders should only be relatives 236 Recommendation: to delete the below This 1000 limit has no basis and is under discussion - 1) Restricted schemes shall not have more than at SEBI. IFSC should not bring in this arbit limit one thousand (1000) investors or such number as may be specified by the Authority.237 34 (1) Provided that pending deployment of money, To add additional method of deployment in bold as - FME may invest money in distribution or other required in operational use and as mentioned in reserves maintained for any purpose as PPM which is filed with SEBI & also issued to specified in Private Placement Memorandum, Investors certificate certificates of deposits deposit, units of investment schemes such as liquid or money market schemes, money market instruments, bank deposits or any other securities or financial assets or instruments as may be specified by the Authority. 238 36 (3) The FME shall ensure that the NAV is disclosed Additional timelines are required for the closed- - to the investors at least on a monthly basis ended fund due to practical challenges. As per the within 15 days from the end of month in case of operational feasibility of sharing this information an open ended scheme and half-yearly within 30 days from the end of half-year in case of a close ended scheme.- If Audited then within 90 days from the end of half year; If unaudited then within 60 days from the end of half year 239 38 (2). In line with the investment valuation norms, the The frequency of this Independent Valuation should - assets of the scheme shall may be valued by an be only once in a year or such other period as independent third-party service provider such as agreed with Investors. a fund administrator or custodian registered with the Authority, a valuer registered with Insolvency and Bankruptcy Board of India or such other person as may be specified by the Authority. The frequency of this Independent Valuation should be only once in a year. 240 40(1) The FME shall ensure that under a restricted To suitably modify to enhance the ceiling from 10% - scheme, the FME or its associate shall commit to 15%. Further, FME contribution should not be to invest :- counted as a layer of investment as that is a mandatory statutory requirement and not an (a) In case of a close ended scheme, investment per se for the calculation of layers under (i) at least 2.5% of the targeted corpus and not Rule 19 (3) of Foreign Exchange Management exceeding 10% 15% of the targeted corpus in a (Overseas Investment) Rules, 2022. scheme with targeted corpus of less than up to USD 30 Million; (ii) at least USD 750,000 and not exceeding10% 15% of the targeted corpus in a scheme with targeted corpus of more than USD 30 Million: Further clarification should be added: Contribution by the FME in the scheme should be exempted from being counted as a layer as per Rule 19 (3) of Foreign Exchange Management (Overseas Investment) Rules, 2022. 241 NA IFSCA AML Guidelines and KYC Compliance All entities registered with the IFSCA must adhere - to the Anti Money Laundering, Counter Terrorist- Financing and Know Your Customer (AML) Guidelines, 2022. A proposal is made to provide flexibility for investors regulated in their home jurisdiction to provide a comfort letter on KYC details. Because, Regulated entities from foreign jurisdictions are sensitive about sharing personal information. Therefore, this exception should be provided for entities regulated in their respective jurisdiction or if their administrator or custodian provides a representation letter without specific ID or address 242 NA Enable Variable capital company structures The current FME Regulations allow fund structures - to be established as trusts, partnerships, or companies. However, the existing Companies Act does not cater to the specific needs of the fund industry, such as the free redemption of capital. Offshore jurisdictions like Singapore have introduced a variable capital company (VCC) regime to address these needs. The proposal suggests that a similar regulation should be introduced under the IFSCA regime to attract capital that might otherwise go to these offshore jurisdictions. Additionally, VCCs should have the option to register each sub-fund as a separate legalentity, similar to Mauritius, with clear guidelines for GST and income tax scheme-wise registrations 243 NA Listing of IFSCA and SEBI registered funds- Currently, there are no listing guidelines for IFSCA - Investor Confidence and liquidity. or SEBI registered Alternative Investment Funds (AIFs). SEBI registered AIFs should have the flexibility to list on the IFSCA stock exchange. Permitting listing of fund vehicles in both IFSC and Indian stock exchanges could also provide a permanent nature to AIFs. 244 NA Common Principal Officer & Compliance Officer Provisions to be added wherein a common - principal officer and compliance officer can be appointed between FME and the affiliate entity who is providing ancillary services in IFSCA 245 NA Single window approval Since now the Schemes are approved by both SEZ, - IFSCA etc., it should be a single window approval for the applicant and internally the Regulators should co-ordinate. 246 NA Doing away the requirement of Provisional letter Provisional letter of allotment or Lease Deed - With reference to the MOM issued of allotment (PLOA) for the Funds Considering there is not a requirement to have a by DC KASEZ dated 22 June separate office/address requirement for the fund / 2022, it has been informed by DC AIFs and such funds can use the office premise of office that since the fund/trust is FME/trustee for the business, accordingly, the just a pooling vehicle and as such requirement of PLOA and Lease Deed should be does not have any done away with. Accordingly, there should be no employees/board of its own, the requirement to submit a separate PLOA or lease IFSC and DC office now permit deed for such funds/AIFs since AIFs are expected Fund houses to set up Fund/trust to use the same premise as the Fund Management and fund manager in a single unit Entity. and multiple trusts can be registered under one fund manager.247 7(3) In case of Registered FME (Retail) and other Currently, the Registered FME (Non-retail) is FMEs that are managing an (‘AUM’) of at least required to appoint the below mentioned 2 KMPs: USD 1 billion 1. Principal officer - responsible for overall activities of the FME including but not limited to fund To enhance the ease of doing business, we management, risk management and compliance; request your goodself to kindly consider and 1. Not extending the requirement to appoint an 2. Compliance officer - responsible for compliance additional KMP for Retail and Non Retail FME or with regulations and ensure suitable risk alternatively, Time period for appointment of management policies and practices at the FME. additional KMP for managing an AUM of at least USD 1 Billion should be within 1 year from the The proposed amendment shall mandate date of circular or within 6 months from the end Registered FME (Non-retail) managing an AUM of of financial year where AUM is crossing USD 1 at least USD 1 billion, to appoint an additional KMP Billion. with the responsibility of fund management, which 2. There should be clarity w.r.t calculation of shall lead to substantial operational and financial AUM whether it would be computed basis challenges to such FMEs. Currently, FMEs face commitment raised/fund raised/total value of considerable difficulties in recruiting 2 KMPs, due to investment. (i) stringent minimum educational qualification and 3. Certification requirement should not be experience requirements, and (ii) lack of sufficient implemented for next 2 years talent pool in the IFSC zone. Adding an additional 4.Application for appointment of KMP (P.O / C.O. KMP with the necessary educational qualification / additional KMP) should be cleared in fast track and experience requirements would enhance these manner where such person already has been challenges and result in significant financial and designated as KMP (P.O / C.O. / additional KMP) operational strain on such FMEs. in his / her previous organisation within IFSC with the approval of IFSCA. Registered FME (Non-retail) do not deal with retail money and have limited investors and larger ticket size, which simplifies fund management processes and involve lesser risk. These FMEs have successfully managed their operations and complied with regulatory requirements with only 2 KMPs. You may also note that the requirement of having adequate resources (minimum of 2 resources with requisite qualification and expertise) is globally accepted and prevalent in popular fund jurisdictions such as Mauritius and Singapore. However, it seems that regulatory requirement to appoint additional person based on AUM is not prevalent in the aforesaid popular fund jurisdictions.Accordingly, we request your goodself to consider relaxing this requirement of appointing additional KMP from an ease of doing business perspective. Further, such relaxation shall reduce undue operational and financial pressures. Your goodself will appreciate that this will reduce undue financial and operational pressures on Registered FME (Non-retail), while still supporting effective regulatory compliance. For Registered FME (Retail), There is no such requirement to add another KMP if assets cross 1 bn. 1. Clarity w.r.t AUM of fund management activity will help AUM computation practice same across the fund management industry in IFSC. Alternatively it should exclude FOF/ Feeder Fund AUM in this computation. 2. FME should have reasonable time period to appointment additional KMP for managing AUM, as it would be difficult to get such KMP with requisite qualification / experience of managing AUM within3 months. 3. Certification requirement will become obligatory on FME, if implemented on an immediate basis, especially when persons to be appointed have professional qualifications like CA/CS/CFA/FRM and are from relevant industry experience. 4. Additionally, we would like to suggest that application for appointment of KMP (PO/CO/additional KMP) should be cleared in fast- track manner where such person already have been designated as PO/CO/additional KMP in his/her previous organization within IFSC with the approval of IFSCA.248 7(4)(b) Minimum experience requirement for the role of The minimum period of experience for the role of Compliance officer: compliance officer has been relaxed only for company secretaries from 5 years to 3 years. We request your goodself to kindly consider Chartered Accountants have a deep understanding reducing the minimum experience requirement of financial systems, business regulations and tax for the role of compliance officer for members of laws. Their expertise enables them to navigate the the Institute of Chartered Accountants of India or complex landscape of compliance with a high any institution equivalent thereto in foreign degree of proficiency. jurisdiction, who have experience in compliance Chartered Accountants possess extensive or risk management in an entity regulated by a knowledge of laws, statutes, and risk management financial sector regulator or a listed company. including internal controls and overall compliance. Their expertise in financial matters enhances their ability to manage compliance and reporting requirements effectively. Chartered Accountants are well suited for compliance roles like company secretaries. Accordingly, we request if your goodself to kindly consider extending the relaxation provided to company secretary for the minimum experience period to Chartered Accountants for the role of compliance officer as well. 249 7(4)(b) Minimum experience requirement for the role of The minimum period of experience for the role of Principal Officer Principal Officer is 5 years in related activities in the securities market or financial products including in a It is suggested to include consultancy portfolio manager, broker dealer, investment experience (such as experience in Big Four advisor, wealth manager, research analyst or fund firms) of not more than 2 years (in the aforesaid management. 5 years period), in activities related to the Consultancy experience (such as experience in Big securities market or financial products – such as Four firms), in areas related to the securities market due diligence services or transaction advisory or financial products —such as due diligence services. services or transaction advisory services, equips the Principal Officer with an experience that is comparable to the roles in portfolio management, brokerage, investment advisory, wealth management, research analysis, or fund management. Accordingly, we suggest your goodself to kindly consider including the consultancy experience (such as experience in Big Four firms) of not morethan 2 years, in activities related to the securities market or financial products – such as due diligence services or transaction advisory services 250 7(5) Certification requirement for employees of FME FMEs are required to appoint Principal officer and Compliance officer who oversee fund management Clarity needed whether employees would cover and overall compliance respectively. each and every employee on payroll of FME/AIF The KMPs possess the requisite educational or only Key Managerial Personnel like Principal qualification and experience as mandated by the officer/ Compliance Officer/Additional Key FME Regulations to fulfill their roles effectively and Person. are well-equipped to undertake their duties. Given the requisite educational qualification and experience of the KMPs, imposing further additional certification requirements on such KMPs shall lead to unnecessary operational burden on the KMPs. Further, other employees (i.e. employees which are not KMPs) handle operational and routine tasks like processing transactions, accounting and maintaining records, customer relationship, etc. Mandating certification for such employees does not align with their supportive and routine roles and functions. The costs and resources required for certifying all employees shall outweigh its benefits. To enhance ease of doing business and reduce operational burden on the employees, we request your goodself to kindly consider not to mandate such certification requirement for all employees of FME. 251 Regulati In order to ensure compliance with the We request your goodself to consider that criteria is on 7 Regulation 7(4), which stipulates the laid down to determine whether principal officer/Key requirement for the Principal Officer and other Managerial Personnel are “based out of IFSC” KMPs as referred under regulations 7(2)and 7(3) Rational: Usually Principal Officer are part of to be based out of IFSC, the insertion is investment team and they have to frequently travel proposed in point number 7 of Application Form to various jurisdiction within India and abroad for as per First Schedule of the Regulations. s u c h i n v e s t m e n t d e a l . I n a b o v e scenario, it is not Recommendation: We suggest that criteria to feasible for Principal Officer to be based out of IFSC determine “based out of IFSC” could be defined throughout the year. Considering above scenario, in the Regulations. there should be absolute clarity on meaning of based out of IFSC. We request you to define the term “based out of the IFSC”252 Regulati Where above disqualification are triggered after Regulation needs to provide time frame for filling on 9 appointment of KMP like Principal Officer, vacancy arising out of disqualification of fit and Compliance officer/other KMP then time period proper requirement as vacancy cannot be filled on within which vacancy of KMP to be filled is not immediate basis. This is also because all clear from existing/proposed consultation paper. appointments need the clearance of the IFSCA We are of the view that at least 1 year time frame authority should be given to fill up vacancy 253 Regulati (b) such person has not incurred any of the There cannot be order of winding up against the on 9 following disqualifications –(i) ………….. (ii) person but against entities like Company, LLP etc. ……………(iii) an order for winding up has been further mere filing of the charge sheet cannot be passed against the person for malfeasance and disqualification the same should be proved and he (iv) if Chargesheet is being filed against the should be convicted for the same. individual; Recommendation: (iii) above can be deleted as there cannot be order of winding up against the person but only against entities like Company, LLP etc. Further the clause regarding the charge sheet can be modified to say that ....... if charge sheet is filed against the individual and he is convicted for the same. 254 24(2) Recommendation: to add the highlighted part as There will ambiguity about the phrase "within 30 below for clarity in 24(2) days from the end of half-year". A defined number The FME shall ensure that the portfolio under of days from the end of the reporting period may the scheme and Net Asset Value (NAV) is offer more clarity disclosed to the investors at least on a yearly basis within 120 days from the end of the half year for close ended scheme and 15 days from end of month for open ended scheme255 26(2) Recommendation: to delete the red superscript Regulated scheme is not defined. The phrase word and add the highlighted part as below for "regulated by a financial sector regulator in India or clarity a foreign jurisdiction" has been used in Para 7 of the Provided that the above requirement shall not FM Regulations and the same should be used to apply in case of a fund or funds scheme ensure that there us no ambiguity investing in regulated scheme(s) regulated by a financial sector regulator in India or a foreign Added another phrase for situations wherein the jurisdiction or having managers subject to such Manager is regulated but not the Fund. This is regulations which are valued by any pertinent from the perspective of foreign independent third-party service provider. jurisdictions wherein the Manager is regulated instead of the Scheme 256 28(1)(b) Recommendation: to add the highlighted part The term "associate" should be restricted only to (i) the FME and its associate (provided the those investing in the Scheme and not those who associate is investing in the Scheme), wherever may be providing services or who are not investing applicable, are not Indian resident and do not in the Scheme. This clarification is important to have have any Indian resident as their ultimate to give clarity to non-resident FMEs looking to set beneficial owners; up in GIFT IFSC, many of whom are part of a global set-up 257 31 Filing of PPM with IFSCA prior to launch of • Fund raise is an integral part of the business of the Scheme and receipt of comments FMEs. Fund raise is important for implementing investments in target companies identified by the (a) Existing Regulations: FME. Target companies have various suitors as investors. For FMEs to participate in any round of • A Registered FME may launch restricted investment in the target company, they need to be schemes through a private placement by filing ready with the Fund in place loaded with investor the placement memorandum with the Authority commitment. along with the application fees as specified by the Authority before twenty-one (21) working • For FMEs to have conclusive discussions with days of launch of the scheme. investors in a time bound manner and seal their commitments, the PPM needs to be crystallized with • The Authority may endeavor to communicate inputs from the IFSCA. Such comments need to be its comments, if any, to the FME within twenty- received in a time bound manner and post one (21) working days of receipt of satisfactory deliberations and discussions, the PPM can be response and the FME shall ensure that the rolled out to investors. comments are duly incorporated in the placement memorandum prior to launch of the • If a time-limit is not provided within which scheme. comments from IFSCA are to be received, the FMEs could potentially miss investing in the desired target Provided that the validity of the placementmemorandum for launch of the scheme shall be companies leading to loss of credibility to close six (6) months from the date of filing with the deals in the eyes of investors. Authority or the date of observation letter of Authority, whichever is later. (b) Proposed amendment as per the Consultation paper: • The amendment proposed as per the Consultation paper seeks to remove the 21 working days time limit for the Authority to provide its comments on the PPM. (c) Our suggestion/ recommendation: For FMEs to plan the launch of Scheme and discuss and agree terms of the PPM with anchor investors and other investors, it is imperative that the comments from IFSCA are received within a specified timeline post filing the PPM. Any comments from IFSCA received post agreeing terms with investors, will lead to unwarranted discussions and plausible conflict with investors which could derail the fund raise. 258 32(1) Recommendation: to delete the below This 1000 limit has no basis and is under discussion 1) Restricted schemes shall not have less more at SEBI. IFSC should not bring in this arbitrary limit than one thousand (1000) investors or such number as may be specified by the Authority. 259 32 Recommendation: Minimum investment Reducing threshold to some extent for non- threshold for non-accredited investors accredited investors including for employees or subscribing to Restricted Scheme may be directors or designated partners of the FME for will reduced in following manner – i) USD 1,00,000 allow increase investor participation base in the for non-accredited investor ii) USD 25000 for restricted scheme. employees or directors or designated partners of the FME260 34 Permissible investments 34. (1) Subject to other The red highlight seems to be a typo error as a provisions of these regulations, a restricted restricted scheme cannot have further scheme scheme may invest moneys collected under any under it. of its scheme only in the following in IFSC, India or foreign jurisdictions: Recommendation: to delete the red strikethrough portion as it seems to be typo error as a restricted scheme cannot have further scheme under it. 261 34 Recommendation: 1. The modification in the proviso will provide more 1. Proviso on Temporary investment may further clarity on temporary investment and it will be in add – divestment proceeds pending re- alignment with SEBI AIF Regulations. 2. This will investment / distribution to investors in addition help FME to have more options as long as such to pending for deployment options are available for investment in IFSC. 2. Type of instruments to be invested under Temporary investment provision may be completely aligned with SEBI AIF Regulations. 262 35(1) Recommendation: to delete the red Changing this from securities of unlisted companies strikethrough portion in 35 (1) and add the to unlisted securities will address the illiquidity risk underlined word for clarity inherent in open-ended schemes. Unlisted entities In case of an open ended scheme, the maximum are permitted to list securities on exchanges, which investment in unlisted securities of unlisted would have liquidity. This is similar to the change companies should not exceed twenty-five Para 22 and 34 of the FM Regulations percent (25%) of the corpus of the schemes. Provided that in case of an open ended fund of fund scheme, this requirement shall not be applicable if such scheme is investing in other open ended scheme(s) which shall not have investment in unlisted securities of unlisted companies in excess of twenty-five percent (25%) of their corpus.263 35(1) 35 (1) In case of an open ended scheme, the There is no such ceiling limit under Securities and maximum investment in securities of unlisted Exchange Board Of India (Alternative Investment companies should not exceed twenty-five Funds) Regulations, 2012 for investment in unlisted percent (25%) of the corpus of the schemes. securities. Considering above, we recommend Provided that in case of an open ended fund of 100% investment in unlisted securities should be fund scheme, this requirement shall not be permitted applicable if such scheme is investing in other open ended scheme(s) which shall not have investment in securities of unlisted companies in excess of twenty-five percent (25%) of their corpus. Recommendation: There is no such ceiling limit under Securities and Exchange Board Of India (Alternative Investment Funds) Regulations, 2012 for investment in unlisted securities. Considering above, we recommend 100% investment in unlisted securities should be permitted 264 36(3) Disclosure of NAV to the investors Your goodself would appreciate that the proposed (a) Existing Regulations: The FME shall ensure amendment of NAV disclosure within 30 days from that the NAV is disclosed to the investors at least the end of half year would cause administrative on a monthly basis in case of an open ended burden for the FMEs since the exercise of carrying scheme and half-yearly in case of a close ended out valuation of unlisted securities and reporting of scheme. NAV (including methodology of the valuation) of (b) Proposed amendment as per the each scheme is a detailed and time-consuming Consultation paper: process which inter-alia involves (i) finalisation of The FME shall ensure that the NAV is disclosed financial statements by portfolio companies in which to the investors at least on a monthly basis within scheme has invested, (ii) collection of relevant data 15 days from the end of month in case of an open from the portfolio companies in which the scheme ended scheme and half-yearly within 30 days has invested,(ii) carrying out valuation of from the end of half-year in case of a close investments in portfolio companies by third party ended scheme. valuer, and (iv) calculation of investor level NAV. (c) Recommendation: Given the above and in order to alleviate the In the case of close ended scheme, we request operational strain on FMEs, we request your your goodself to kindly consider extending the goodself to kindly consider extending the timeline of timeline of disclosing the NAV to investor from disclosing the NAV to investor from 30 days to 120 30 days to 120 days from the end of half year. days from the end of half-year in case of a close ended scheme. Further, the aforesaid relaxation will also align with the 120 days window provided to complete the annual reporting in case ofRegistered FME (non-retail), as per FME regulations. 265 36(3) Recommendation: to add the highlighted portion There will ambiguity about the phrase "within 30 for clarity days from the end of half-year". A defined number 36 (3) The FME shall ensure that the NAV is of days from the end of the reporting period may disclosed to the investors at least on a monthly offer more clarity basis within 15 days from the end of month in case of an open ended scheme and half-yearly 120 days from the end of the half year for the relevant year in case of a close ended scheme. 266 38(2) Recommendation: to delete the red Regulated scheme is not defined. The phrase strikethrough portion in 35 (1) and add the "regulated by a financial sector regulator in India or underlined word for clarity a foreign jurisdiction" has been used in Para 7 of the Provided that the above requirement shall not FM Regulations and the same should be used to apply in case of a fund of funds scheme investing ensure that there us no ambiguity in regulated scheme(s) regulated by a financial sector regulator in India or a foreign jurisdiction Added another phrase for situations wherein the or having managers subject to such regulations Manager is regulated but not the Fund. This is which are valued by any independent third-party pertinent from the perspective of foreign service provider. jurisdictions wherein the Manager is regulated instead of the Scheme 267 40 Removal of maximum ceiling limit for A) One of the conditions for non-applicability of cap contribution by the FME or its associate in the on the contribution by the FME or its associate in Restricted scheme in certain cases the Scheme is that the FME and its associate, (a) Existing Regulations: According to wherever applicable, are not Indian resident and do Regulation 40 of the FME Regulations, the not have any Indian resident as their ultimate maximum contribution by an FME or its beneficial owners (emphasis applied). associates in the Scheme is capped at 10% of the targeted corpus of the Scheme. However, the term ‘Indian resident’ is not defined in (b) Proposed amendment as per the the proposed amendment. The meaning of the term Consultation paper: The amendment proposed ‘India resident’ is different in various statutes like as per the Consultation paper seeks to remove FEMA, income-tax. the cap on the contribution by an FME or its associates in the Scheme, subject to the Accordingly, we request your goodself to kindly fulfillment of following conditions: consider providing clarity that the term ‘Indian a. the FME and its associate, wherever Resident’ in the FME Regulations shall mean a applicable, are not Indian resident and do not ‘person resident in India’ as per the Foreign have any Indian resident as their ultimate Exchange Management Act, 1999.beneficial owners; and B) The term "associate" should be restricted only to b. Maximum investment in an investee company those investing in the Scheme and not those who and associates of such company is up to 33% of may be providing services or who are not investing the corpus. in the Scheme. This clarification is important to have (c) Recommendation: to give clarity to non-resident FMEs looking to set A) We request your goodself to kindly consider up in GIFT IFSC, many of whom are part of a global clarifying the definition of the term ‘Indian set-up Resident’ to mean a ‘person resident in India’ as per the Foreign Exchange Management Act, 1999. B) to add the underlined phrase in prong (i) for clarity (i) the FME and its associate (provided the associate is investing in the Scheme), wherever applicable, are not Indian resident and do not have any Indian resident as their ultimate beneficial owners; 268 50(2) Recommendation: to delete the red Regulated scheme is not defined. The phrase strikethrough portion in 50 (2) and add the "regulated by a financial sector regulator in India or underlined word for clarity a foreign jurisdiction" has been used in Para 7 of the Provided that the above requirement shall not FM Regulations and the same should be used to apply in case of a fund of funds scheme investing ensure that there us no ambiguity in regulated scheme(s) regulated by a financial sector regulator in India or a foreign jurisdiction Added another phrase for situations wherein the or having managers subject to such regulations Manager is regulated but not the Fund. This is which are valued by any independent third-party pertinent from the perspective of foreign service provider. jurisdictions wherein the Manager is regulated instead of the Scheme 269 132 Recommendation: The proposed requirement Appointment of Custodian for securities issued in that Custodian shall be based in an IFSC, should India i.e. SEBI jurisdiction should not be mandatorily be relaxed where SEBI registered Custodian is required to have IFSC based Custodian. Currently, appointed for the securities issued in India. 5 of our funds registered as FPIs and the Custodian IFSC based Custodian may be mandated for that we have appointed is …… Bank which is SEBI securities issued and subscribed within IFSC. registered but doesn’t have corresponding IFSCA Registration. Out of these 5 funds, 4 funds are relocated from Singapore where we originally had …. Bank as Custodian and we have continued the same Custodian for operational ease whilerelocating the funds. Further, for one of our new funds launched in this financial year also we have appointed ……. Bank as Custodian. The documentation process could be efficiently handled with same Custodian as they being aware about our entire structure, and application can be processed in time efficient manner. If the proposed change is made effective with retrospective effect, it will be an operational hassle to move our assets to another Custodian. Hence, we request to allow SEBI registered Custodian to act as Custodian for securities issued in India. 270 Suggestion: FME entity should be eligible to invest its earnings The extant regulations / guidelines don’t have in IFSC and guidelines/norms/clarity in this regard norms on investment by FMEs. will be helpful IFSCA may issue some guidelines / norms allowing FMEs to invest 271 Assets Under Management (AUM) to be defined AUM has been used extensively in the FM Assets Under Management (AUM) is defined as Regulations but has not been defined. From the market value of the investments managed context, this refers to the value of the investments by the FME of the Schemes managed by the FME. To ensure no lack of clarity, it should be defined 272 Fee amounts to be reduced for funds and be Various Managers have asked for the fee amounts based on a graded scale basis Fund Size to be rationalised in order to facilitate small time fund managers to launch in GIFT IFSC. This is similar to the ask to reduce the initial scheme size from $5M to $3M 273 Create / enable / facilitate setting up and running • Any Offshore Fund which is in existence, would of employee benefit trusts within GIFT under have an agreed set of commercials, investment IFSCA regime strategy, commitments at inception and Relaxations required to facilitate relocation of operationalised drawdowns and investments. offshore pooling vehicles to GIFT - IFSCA Increasing commitment of any investor and offshore advisor at the time of relocation will result in (a) Existing Regulations: distorting the fund construct, unit / share capital structure, agreed commercials and could adversely • Relaxation from sponsor commitment for funds affect IRR and derail relocation to GIFT relocating to GIFT from offshore jurisdictions, ispermitted under the FME Regulations. • For existing offshore funds, commitment of investors and offshore advisor (collectively referred (b) Our suggestion/ recommendation: to as shareholders) may be below the minimum requirement of USD 150,000 as per FME • Permit offshore funds to relocate to GIFT with Regulations. Also, such funds may be well past the the existing commercials agreed with investors final closing and therefore any change in and offshore manager / advisor commitment will distort the fund construct. • Relaxation from minimum commitment to existing investors • Offshore manager / advisor typically need to • Relaxation from minimum commitment to continue to hold units in the Resultant Fund to be offshore manager / advisor set up in GIFT to honour commercials agreed at the inception of the overall fund construct – this could be agreed with certain investors on exits. • While funds dealing in listed securities have relocated to GIFT, VC / PE funds are yet to attempt relocation to GIFT. If the relocation framework supports the above, it should open flood gates for such funds to actively consider relocating to GIFT. • The relaxations will also act as a catalyst for SWFs, offshore institutional fund managers (being LPs of PE / VC funds) to familiarize themselves with GIFT and IFSCA regimes and consider relocating existing vehicles / setting up new fund vehicles in GIFT.274 Create / enable / facilitate setting up and running • For FMEs, allocation of differentiated returns of employee benefit trusts within GIFT under arising from schemes under management is of IFSCA regime utmost importance. As FMEs strengthen their presence in GIFT, senior employees and KMPs are incentivized with share in differentiated returns of schemes under management. A common way of structuring such share in differentiated returns is an employee welfare / benefit trust. Currently, there is now enabling framework for creation of such trusts and allotment of differentiated returns to such trusts. • Start-ups and growth companies incentivize their employees and KMPs by way of ESOPs / MSOPs. Typically, such ESOPs / MSOPs are settled in a trust and are tagged with eligibility and vesting conditions. As companies grow, the trust becomes a vehicle for keeping ESOPs / MSOPs rolling over years and across various levels of employees and KMPs. This is a common practice amongst various listed companies. 275 132 We suggest that custodian in IFSC may be made New explanation has been added in Para no 132 As GIFT IFSCA would like to have mandatory for securities listed in IFSC only. that custodian shall be based in IFSC unless the further investments, it should offer local laws of the jurisdiction where the securities similar treatment to FMEs as For securities, listed outside IFSC, respective have been issued do not permit the same permitted by other Financial fund management entities may be permitted to Centres example : DIFC, appoint custodian at the local market wherein We suggest that in cases, wherein the underlying Singapore, Mauritius securities is listed or in IFSC as per their securities are listed outside IFSC, flexibility can be https://www.mas.gov.sg/~/media/ requirement. given to Fund management entities to appoint MAS/Regulations%20and%20Fin custodian in IFSC or outside IFSC. ancial%20Stability/Regulations%2 0Guidance%20and%20Licensing/ We would recommend the following wording of the Securities%20Futures%20and%2 explanation: 0Fund%20Management/Regulati Explanation. – The Custodian appointed under this ons%20Guidance%20and%20Lic regulation shall be based in an IFSC, unless the ensing/Regulations/SFLCBReg local laws of the jurisdiction where the securities have been issued do not permit the same, in which Singapore extract on custodian for case, the FME may appoint a custodian which is assets : based in India or foreign jurisdiction and is regulated /// b y the financial sector regulator of that jurisdiction. (3) Without prejudice to paragraph(1) and subject to the customer’s prior written consent, the holder may, for the purpose of the safe custody of the customer’s assets denominated in a foreign currency, maintain the custody account with a custodian outside Singapore which is licensed, registered or authorised to act as a custodian in the country or territory where the account is maintained. /// Dubai : https://dfsaen.thomsonreuters.co m/rulebook/eligible-custodian /// a) a Bank; (b) a legal entity that is authorised to accept deposits and supervised by the Central Bank of the State; or (c) a legal entity that is: (i) authorised to accept deposits and supervised by a Financial Services Regulator in a jurisdiction outside the State; and (ii) Rated at least A- by Standard & Poor's, or the equivalent by another Rating Agency. /// Mauritius : https://www.stockexchangeofmau ritius.com/media/2094/the- securities-recognition-of-remote- custodians-rules-2013.pdf 276 7(3) Exemption for appointment of additional KMP in • The proposed regulation requires appointment of case of captive FMEs set up by Sovereign additional KMP within 3 months from the close ofWealth Funds (‘SWF’) managing an AUM of at the financial year in case of FMEs that are least USD 1 Billion as at the close of a financial managing an AUM of at least USD 1 Billion as at the year close of a financial year. • SWFs looking at setting up FME in IFSC would typically manage owned funds and may not look at managing third party funds. Thus, the activities of such FME would be captive in nature. IFSC fund to whom such FME would provide management services would typically be a fund with SWF as the sole contributor. • SWFs looking at investment in India generally have a horizon for investing a sizable amount, generally more than USD 1 billion. Further, the deal size for individual investment by such captive IFSC fund (having SWF as the sole investor) is generally higher as compared to funds having non-SWF investor. In case of AUM exceeding USD 1 billion, the level of operations in FME (managing funds having non-SWF investors) is much higher as compared to FME managing fund which has SWF as its sole investor. Thus, there cannot be a common yardstick for measuring the level of operations and risks of FME (managing fund with SWF as investor) and FME (managing fund with non-SWF as investors). • Investment by SWF in IFSC fund (SWF being the sole investor) in excess of USD 1 billion does not lead to any heightened risk for FME. • In such case, there should not be any requirement for such FMEs to appoint additional KMP even if the AUM exceeds USD 1 Billion. • The PO and CO along with the Board of Directors of FME can undertake and oversee the investment and compliance related function of FME.• Further, since the intention of IFSCA is to bring/maintain IFSC platform at par with offshore fund jurisdictions, it is worthwhile to note that captive investment vehicles in other common holding and investment jurisdictions (e.g. Abu Dhabi Global Market (‘ADGM’), Jersey (Channel Islands), Cayman Islands) do not provide any condition for having a minimum number of employees depending on the size of investment. Thus, our suggestion is to provide waiver off such a requirement for captive FMEs to ensure that the FME Regulations are at par with global jurisdiction in terms of captive set ups by investors. • In view of the above, we request that a waiver be provided for appointment of such additional KMP to FMEs managing IFSC funds where SWF is the sole investor. 277 7 The current KMP criteria, particularly concerning 1. The current strict requirements for educational educational qualifications, pose significant qualifications and experience are leading to challenges in attracting suitable talent. There is frequent job changes among candidates who meet humble suggestion that the IFSCA should these criteria, which disrupts the operational consider practical experience and demonstrated continuity of FMEs. skills in fund management operations as alternate pathway to higher educational 2. Many professionals possess the practical qualifications for KMP positions: expertise required to manage funds and operations effectively, but do not meet the stringent higher 1. allowing candidates with substantial formal educational requirements. experience in fund management operations to qualify as KMPs, or 3. By providing more flexible qualification criteria using certification exam, the IFSCA could attract 2. allowing candidates with lesser experience more stable and experienced talent, helping to supplemented with a certification from IFSCA to support the growth of FMEs in GIFT City. ensure that these candidates possess the necessary understanding of fund 4. Stable and continuity in operation of FME would management principles. facilitate the growth of AUM at GIFT-IFSC. This, in turn, would attract more qualified and experienced professionals as the industry matures and expands.278 Regulati The proposed requirement of appointing a KMP FMEs face considerable difficulty even in recruiting NA on 7(3) for Registered FME (Non-retail) even after 2 KMPs, due to stringent minimum educational managing an AUM of 1 bn dollar. qualification and experience requirements and lack of sufficient talent pool in the GIFT City. For Registered FME (Retail), the need for an additional KMP is justified given the involvement of retail money, higher number of investors and smaller ticket size, which isn't the case for Registered FME (non-retail). Hence, from ease of doing business and reducing operational and financial cost, the requirement of additional KMP should not apply. 279 Regulati Certification requirement for employees of FME If a FME has employed more than the minimum NA on 7(5) mandated resource requirements, the certification The certification requirement should not apply to should not apply to all employees of the FME in FME who are meeting the resource requirement IFSC. Also, to align with SEBI Regulations, any 1 as per revised criteria proposed in the KMP can maximum go through the certification consultation paper (as this will be the revised requirement. regulations) or at maximum shall apply only to one of the KMPs (either the principal officer or compliance officer). 280 Regulati Either the validity of the PPM should be Given that offshore fund raise is more challenging NA on 31 (2) extended to 18 or 24 months or for re-filing of the and time-consuming than domestic funds, the - Proviso PPM for the same scheme, the applicable fee timeline of 12 month may be lower to achieve the should be lower. first close in IFSCA. Alternatively, to reduce the set- up cost, if the same scheme is filing the PPM again, then a reduced fee should be applicable.281 Regulati Requesting to remove the said requirement of Category III AIFs are defined to undertake NA on 35(1) limiting the investment in securities of unlisted investment with diverse or complex trading companies to 25% of corpus of scheme. strategies including investment in listed or unlisted derivatives and for permitted investments under longevity finance. The definition highlights that the fund may apply complex structures and can invest in both listed and unlisted securities (without any restrictions). The only avenue for launching an open-ended scheme is under Category III AIF. This clause seems to be restrictive for launching an open-ended fund with investment strategy for debt securities. Even if one compares to SEBI AIF regulations, there are no such restrictions capping the securities on the basis of listed / unlisted nature of securities. The assumption that listed securities (especially in case of debt securities) are liquid and easily saleable may not be so true in context of Indian debt securities. It is best left to the Investment Manager to create and run an open-ended strategy by adopting suitable risk guardrails (for ex: Gatting restriction of say 5-10% of Fund NAV, lock-in period, managing portfolio liquidity, cashflow profile of underlying securities, etc.). Multiple global funds are set up as quarterly interval fund (with underlying debt securities), offering window of redemption to the extent of 5-10% of fund NAV on a pro-rata basis to investors seeking redemption.282 Regulati Investment restrictions Restriction and approval requirements for trade with NA on 35(4) associates and schemes under common (a) Existing Regulations: management need not be legislated if an enabler/disclaimer/disclosure of such potential As per regulation 35 of the FME Regulations, in trade is made in the PPM. IFSCA may look at case of an open ended restricted scheme, the legislating on mandatory disclosure with maximum investment in securities of unlisted companies is up to 25% of the corpus. (b)Proposed amendment as per the Consultation paper: The amendment proposed as per the Consultation paper seeks to have Restricted schemes obtain prior approval from 75% of investors by value before buying or selling securities involving associates, related schemes, or any investor committed to at least 50% of the scheme's corpus. 283 Regulati The timeline for providing NAVs and other Certain cases like year-end NAVs (which are NA on no reportings are generally discussed, negotiated nothing but networth attributable to investors or 36(3) with investors in PPM/fund documents. partners in the fund), may get finalised only after the Timelines for report submission should be left for audits are finalised which may be in-practical to investor and manager to agree and negotiate in complete within the timeline proposed in the fund documents. consultation paper. 284 Regulati Request you to amend the existing FME In case of a discretionary PMS, it has been provided NA on 73(3) Regulations and provide a similar exemption (as that it shall invest in the securities listed or to be under SEBI Regs) of investing in unlisted listed or traded on the stock exchanges, money securities to portfolio managers in IFSC in case market instruments, units of investment scheme of accredited investors investing above a similar and other specified financial products as specified monetary threshold (equivalent to INR 10 Cr). by IFSCA. SEBI (PMS) Regulations, 2020 Securities and Exchange Board of India (Portfolio Managers) Regulations, 2020 [‘SEBI (PMS) Regulations, 2020] provide a similar framework for regulating portfolio management services in India. Further, Regulation 24(3) uses similar language to provide that the discretionary portfolio managershall invest funds of his clients in the securities listed or traded on a recognized stock exchange, money market instruments, units of Mutual Funds and other securities as specified by Board from time to time, on behalf of their clients. • The SEBI (PMS) Regulation, 2020 have introduced the terms ‘accredited investors’ and ‘large value accredited investors.’ An accredited investor means any person who fulfils the prescribed criteria as per SEBI and has received a certification of accreditation by an accreditation agency. Also, a large value accredited investor means an accredited investor who has entered into an agreement with portfolio manager for a minimum investment amount of INR 10 crores. • However, since ‘large value accredited investors’ are sophisticated investors, there has been an exemption provided under Regulation 24(4A), wherein portfolio manager may offer discretionary or non-discretionary or advisory services for investment up to hundred percent of the assets under management of the large value accredited investors in unlisted securities, subject to appropriate disclosures in the disclosure document and the terms agreed between the client and the portfolio manager. 285 Regulati It is recommended that IFSCA should issue FMEs are awaiting operational guidelines NA on 41 (1) detailed operational guidelines on co-investment (especially for the SPV framework) to give effect to by Scheme. Co-investments for funds based in IFSC. Adequate clarity in this regards, can ensure that Co- investments are also enabled in GIFT, IFSC.286 7 1. Clarity w.r.t AUM of fund management activity will help AUM computation practice same across the fund management industry in IFSC. 2. FME should have reasonable time period to appointment additional KMP for managing AUM, as 1. There should be clarity w.r.t calculation of it would be difficult to get such KMP with requisite AUM whether it would be computed basis qualification / experience of managing AUM within 3 commitment raised/fund raised/total value of months. investment. 3. Certification requirement will become obligatory 2. Time period for appointment of additional KMP on FME, if implemented on an immediate basis, for managing an AUM of at least USD 1 Billion especially when persons to be appointed have should be within 1 year from the date of circular professional qualifications like CA/CS/CFA/FRM or within 6 months from the end of financial year and are from relevant industry experience. where AUM is crossing USD 1 Billion. Implementation of this requirement rationally will help achieve the objective of ease of doing 3. Certification requirement should not be business. mandated for all employees and can be implemented after next 2 years. 4. Additionally, we would like to suggest that application for appointment of KMP (PO/CO/additional KMP) should be cleared in fast- track manner where such person already have been designated as PO/CO/additional KMP in his/her previous organization within IFSC with the approval of IFSCA. 287 32 Minimum investment threshold for non- Reducing threshold to some extent for non- accredited investors subscribing to Restricted accredited investors including for employees or Scheme may be reduced in following manner – directors or designated partners of the FME for will i) USD 1,00,000 for non accredited investors allow increase investor participation base in the ii) USD 25000 for employees or directors or restricted scheme. designated partners of the FME 288 34 1. Proviso on Temporary investment may further 1. The modification in the proviso will provide more add – divestment proceeds pending re- clarity on temporary investment and it will be in investment / distribution to investors in addition alignment with SEBI AIF Regulations. to pending for deployment 2. Type of instruments to be invested under 2. This will help FME to have more options as long Temporary investment provision may be as such options are available for investment in completely aligned with SEBI AIF Regulations. IFSC.289 35(5) We refer to sub regulation 5) that proposed to be added under Regulation 35 where IFSCA is providing to issue condition of investment in FME should have flexibility to decide type of accordance with Category. Category and type of product, by ensuring its primary character of restricted non-retail scheme. Choice of Category and type of product should Any detailed / restrictive conditions on investments be left open to FME’s discretion without too may be avoided. much specification on investment type / investment conditions in order to have flexibility. 290 36(3) The portfolio investments held by close ended funds includes investment in SEBI Registered AIFs and unlisted securities Since the exercise of carrying out valuation of unlisted securities and reporting of NAV (including methodology of the valuation) of each scheme is a detailed and time-consuming process which inter- alia involves (i) getting financial information including from by unlisted portfolio companies (unlisted companies are not required to have their Time period for close ended funds should be 120 accounts audited and reported on quarterly basis days from the end of half year with certain timeline unlike listed companies), (ii) collection of relevant data from the portfolio companies in which the scheme has invested (iii) calculation of fund level and investor level NAV. Further, where such investment is done through SEBI Registered AIF, IFSC based fund can determine its NAV only upon disclosure by SEBI Registered AIFs. Accordingly, we request to keep the timeline of at least 120 days, which we believe is a reasonable timeframe for disclosure of NAV.291 132 For securities issued in India i.e. SEBI jurisdiction, it should not be mandatorily required to appoint IFSC based Custodian. Currently, 5 of our funds registered as FPIs and the Custodian that we have appointed is Standard Chartered Bank which is SEBI registered but doesn’t have corresponding registration with IFSCA. Out of these 5 funds, 4 funds are relocated from Singapore where we originally had Standard The proposed requirement that Custodian shall Chartered Bank as Custodian and we have be based in an IFSC, should be relaxed where continued the same Custodian for operational ease SEBI registered Custodian is appointed for the while relocating the funds. securities issued in India. Further, for one of our new funds launched in this IFSC based Custodian may be mandated for financial year also we have appointed Standard securities issued and subscribed within IFSC. Chartered Bank as Custodian. The documentation process could be efficiently handled with same Custodian as they being aware about our entire structure, and application can be processed in time efficient manner. Further, if the proposed change is made effective with retrospective effect, it will be an operational hassle to move our assets to another Custodian. Hence, we request to allow SEBI registered Custodian to act as Custodian for securities issued in India. 292 IFSCA may issue some guidelines / norms FME entity should be eligible to invest its earnings allowing FMEs to have investing options in IFSC and guidelines/norms/clarity in this regard would be helpful 293 132 1. Key countries that require custodian to be in the country are China, Korea and Japan (for mutual funds only). We believe that such restrictions are there only to - a. Ensure capital and compliance control when fund raising is done in that country or b. Majority of the investments happen back in the same jurisdictionConsidering that the IFSC is currently a hub for investment activity, with investments in India and\or overseas, it is proposed that such a restriction be not put in. 2. As there are limited capital investment opportunities within GIFT as of now, the presence of the custodian in GIFT for investments outside of GIFT, will be limited to becoming a contracting entity who passes on the instruction to either a custodian in India or an overseas global custodian depending on the client's investment requirement. This setup may become very basic and cause operation delays as it will introduce another leg for information flow i.e. the custodian at GIFT alternatively it may be just a contracting entity with the custody functions being performed outside of IFSC. 3. Global entities like large asset managers, hedge funds, sovereign wealth funds etc. have a detailed due diligence process in appointing their providers. They would have their global providers\custodian who then in-turn contract with local(sub-custodians) in specific market like India. With such funds wanting to setup in GIFT, they will have to undertake the due-diligence of the custodian in GIFT which will be a deterrent. Recommendation : Basis client and investor feedbacks and global practices, for assets outside of GIFT, Investors should have the flexibility of appointing Custodians outside of GIFT. As and when there are listed instruments at GIFT, the Custodian can be GIFT based for such assets. 294 7(3) FME may be exempted from additional KMP, if In Feeder Funds, active fund management occurs the funds are feeder funds. at the Master Fund level. Meanwhile, the designated fund manager is responsible forselecting the underlying funds, as well as continuously monitoring and deploying the capital. 295 7(4) Inclusion of wider array of institutions Wider inclusion could attract a broader pool of (recognised stock exchange/regulator, etc.) qualified professionals, thereby enhancing the issuing certifications should be done for Key attractiveness and competitiveness of the IFSC. Managerial Personnel (KMP) to manage funds This approach should be balanced to ensure it does operating within IFSCA. not compromise the quality of fund management. 296 24(2) The below statement seems to contain a discrepancy regarding the timing of disclosures. The FME shall ensure that the portfolio under the scheme and Net Asset Value (NAV) is disclosed to the investors at least on a yearly basis within 30 days from the end of half-year". It should be 30 days from the end of financial year or something similar. 297 31(1), The IFSC Fund Management Regulations These grey areas can become a matter of concern 31(2) explains the structure of the fund to be launched at a later date if LOR is not issued by IFSCA. under Category I, II, III in one liner. The regulation is interpreted differently by different experts. In the absence of approval of PPM by IFSCA, there is a risk of adverse comments from IFSCA during inspection at a later date which would be a point of concern for both Investors and FME. Category II AIF is defined as the fund which does not qualify under Category I and III. Category III is defined as the fund which uses complex structure to invest in listed and unlisted securities. Cat III can be both open-ended or close-ended. Can Category II fund invest in Units of Master Fund or Participating shares of Feeder Fund under Master Feeder Structure. Here the units / share are unlisted? 298 31(2) In the absence of the timeline for The Authority Letter of registration is essential to open bank to accounts and also launch the scheme, as communicate its comments would lead to undue institutional investors would ask for the same. Thisdelay in launch of scheme as the authority has also confirms that the launch fund is in accordance proposed to strike off the timeline of 21 days with the Fund Management Regulation. 299 31(2) IFSCA has proposed increasing the validity of Currently, the Fees is 20% of the registration fees. the PPM which is a welcome step. But the During adverse economic scenarios, it would be proposal of refiling the PPM with full fee difficult to raise money. If the FME is short of USD 5 expensive for the FMEs. This would restrict the Mn funds by few lakh USD, it would be a huge number of investment options launched by the economic impact for him to pay the 100% FME. registration fees again and refile the PPM, as he is already paying other operational expenses though the fund is not launched. The authority should keep the fees for the extension of validity to the minimum 300 132 Fund of Funds (FOFs) should be exempted from The requirement for appointing a custodian could be the requirement of appointing custodians. In exempted for Funds of Funds (FOFs), akin to the FOFs, the custodians would be holding only relaxation provided for independent party valuation statements / contract notes as many Master for FOFs Funds issue only statement or contract notes. However, the Master Funds do have the custodians. 301 In addition to the qualification requirement, the SEBI (AIF) Regulations have also introduced NISM IFSCA (FM) Regulations now have an certification requirement for Principal Officer. experience as well as a certification requirement However, with the introduction of certification for Principal Officer and Compliance Officer. requirement, the requirement to have the Fund Furthermore, the certification requirement is also Management experience has been done away with. for all employees of the FME. Further, under the SEBI (AIF) Regulations, the 7(4)(b) Certification requirement is only for the principal In order to improve ease of doing business, one officer and not for all employees of the AIF. of the requirements mentioned above for Principal Officer and Compliance Officer (i.e., Accordingly, the IFSCA (FM) Regulations should be either experience requirement or certification at par with the SEBI (AIF) Regulations, in terms of requirement) should be removed. requisite experience and certification requirement. 302 Certification requirement for employees of FME: FMEs are required to appoint Principal officer and 1. The certification requirement should only be Compliance officer who oversee fund management for the Principal Officer and Compliance Officer, and overall compliance respectively. The KMPs 7(5) and not for all employees possess the requisite educational qualification and 2. The employees should have a period of 1 year experience as mandated by the FME Regulations to from the launch of the Fund or from the date on fulfill their roles effectively and are well-equipped to which the Regulations come into force undertake their duties. Given the requisite(whichever is later) to comply with the educational qualification, experience and certification requirements certification of the KMPs, imposing certification 3. The new employees of FME should have a requirements on other employees may be period of 6 months from the date of joining the burdensome. Further, a time period of one year is FME, to complete the certification requirement necessary to ensure that the Fund launch is not delayed because of the certification requirement 303 In certain foreign jurisdictions, the Fund is not regulated but the Fund Manager is regulated. To clarify that the regulated scheme(s) include Further, the RBI had also issued a Circular on 7 Schemes in India as well as outside India. June 2024, providing that Overseas Investment can 26(2) Further to clarify that in case the Fund Manager also be made in a Fund which whose activities are of the Scheme is regulated, the same would be regulated by financial sector regulator of host sufficient country through a fund manager. Thus, this clarification is necessary. 304 Reducing threshold to some extent for non- The minimum investment per investor should be accredited investors including for employees or reduced to USD 125,000 (for all investors except directors or designated partners of the FME for will 32 accredited investors and employees) and USD allow increase investor participation base in the 31,250 for employees of the FME Non-Retail Scheme. This would also be at par with the requirements under the SEBI (AIF) Regulations, 305 The proposed requirement that Custodian shall be based in an IFSC, should be relaxed where Appointment of Custodian for securities issued in SEBI registered Custodian is appointed for the 132 India i.e. SEBI jurisdiction should not be mandatorily securities issued in India. IFSC based Custodian required to have IFSC based Custodian may be mandated for securities issued and subscribed within IFSC. 306 Since Fund manager entity in India is allowed to invest surplus Funds in the Indian stock exchange, Additiona Allow FME to invest additional money/ income FMEs in the IFSC should also be permitted to invest l Point earned by it in Indian securities in Indian securities. Safeguards may be put in place to avoid round tripping 307 Reduce the amount of application and annual Under the IFSCA (FME) Regulations, 2022 (‘the fees: FME Regulations’), an FME is required to pay an Additiona 1. IFSCA shall consider the application fee for application fee of up to USD 22,500 for filing the l Point launch of the first scheme to be based on target private placement memorandum with the IFSCA. AUM enabling smaller funds to achieve break While we understand the rationale behind such even earlier fees, we believe that they can prove to beexcessively prohibitive for FMEs starting with small 2. Annual recurring fees must be reduced and fund size. Such FMEs are vital to the ecosystem as even if they must be charged, they should be they are often set up by professional entrepreneurs linked to AUM with a small minimum and cap at and are likely to differentiate themselves by the upper end delivering value. As such, they can play a big role in the growth of the ecosystem. The assets they raise 3. Application fees for launching subsequent over time will come to them not because of schemes must be significantly reduced and reputation or strong channel presence but because again linked to target AUM with a small minimum of their performance. and cap at the upper end An upfront cost of $22,500 for every scheme the FME launch is prohibitive and pushes up the breakeven AUM to a very high level and thus deters the FME from offering a range of strategies that they are capable of to potential clients. Most of the FMEs have expertise to manage funds invested in Indian Equities and funds invested in global equities and for various regulatory reasons, these must be kept as two strategies separate. Unlike the SEBI AIF Regulations where every AIF requires individual registration and incurs associated fees, the FME Regulations emphasize on the registration and regulation of the FME itself, rather than the investment schemes directly. This distinction warrants a reconsideration of the fee structure, particularly concerning subsequent investment schemes launched by the same FME. With no drop in fee for subsequent schemes, the scale benefits are diminished. In our estimate, breakeven for any scheme launched in IFSC can be brought down by 20% or so by reducing the fee for additional schemes from $22,500 to say $2,000 and link the same to AUM. Furthermore, it is important to note that FMEs are also subject to annual recurring fees of $2,000. This cumulative financial burden, coupled with the substantial costs associated with launching investment schemes, can act as a deterrent for new entrants and stifle the growth of the financial ecosystem within the IFSC.308 26 (2). In Category-1 Merchant bankers and Global • It is to be noted that Category-1 merchant bankers • Practices Prevalent in other line with consulting firms or leading valuation firms with registered with SEBI have been carrying out several financial centres: the minimum experience of 10 years, subject to valuations for large global funds operating in India The current regulation of Dubai investme approval of majority of fund investors should be with their Indian offices/ funds registered with SEBI. Financial Services Authority, Abu nt included Most of these funds use global consulting/ valuation Dhabi Global Markets valuation firms to value their investment holdings across the International Financial Centre, norms, globe and India. allows appointment of a person the • Further, Category 1 merchant bankers perform who is qualified and is able to assets of valuations including that for FEMA and Income tax provide professional valuation the purposes. They also provide fairness opinion services, that is, independent and scheme services which help boards of directors in taking objective. may be critical decisions to protect minority shareholders in Further, Monetary Authority of valued case of deals involving listed companies. Singapore suggests that by an • As per the current provisions, an independent unquoted investments should be independ third-party service provider registered with the valued by a person approved by ent third- Authority can perform valuations, and while the the trustee (or the VCC Directors, party current regulation does not exclude Category 1 in the case of a scheme service merchant bankers or global valuation firms, the constituted as a VCC or is a sub- provider, current proposal does not specifically include such fund thereof) as qualified to value such as a firms. such assets. fund • The global financial centers such as Dubai, Abu administr Dhabi and Singapore does not limit or exclude any Potential impact of the suggestion ator or special category of valuation firms and only require • Most of the multi-national funds custodia independent, qualified, and professional third-party follow accounting standards based n, valuation firms to provide independent and objective on their country of origin which registere valuation services. may have a different compliance d with the • Hence, both Category-1 Merchant bankers and requirement; therefore, these Authority Indian subsidiaries of global consulting / valuation multi-national funds would prefer , a valuer firms should be included in the definition of to have one professional and registere independent valuer. independent valuation firm to d with • Valuation of unlisted securities is a subjective provide valuation services across Insolven matter expertise and hence person signing the jurisdictions including India. cy and report should have a minimum of 10 years of Hence, allowing Indian subsidiary Bankrupt relevant valuation experience in this field. of global consulting firms or cy Board valuation firms with relevant of India experience would provide ease of or such doing business for foreign funds other operating or planning to operate person under IFSC as maybe specified by the Authority 309 7(3) Appointing additional KMP by Authorised FME • Currently, the Authorised FME and Registered and Registered FME (Non-retail) managing FME (Nonretail) are required to appoint the below Assets under management (‘AUM’) of at least mentioned 2 KMPs: USD 1 billion 1. Principal officer - responsible for overall activities of the FME including but not limited to fund • To enhance the ease of doing business, it is management, risk management and compliance; suggested that the requirement to appoint an and additional KMP should not be extended to 2. Compliance officer - responsible for compliance Authorised FME and Registered FME (Non- with regulations and ensure suitable risk retail). This will reduce undue financial and management policies and practices at the FME. operational pressures on Authorised FME and Registered FME (Non-retail), while still • The proposed amendment shall mandate supporting effective regulatory compliance. Authorised FME and Registered FME (Non-retail) managing an AUM of at least USD 1 billion, to appoint an additional KMP with the responsibility of fund management, which shall lead to substantial operational and financial challenges to such FMEs. • Currently, FMEs face considerable difficulty even in recruiting 2 KMPs, due to stringent minimum educational qualification and experience requirements and lack of sufficient talent pool in the IFSC zone. Adding an additional KMP with the necessary educational qualification and experience requirements would enhance these challenges and result in significant financial and operational strain on such FMEs. • For Registered FME (Retail), the need for an additional KMP is justified given the involvement of retail money, higher number of investors and smaller ticket size, which increase risk and necessitate more robust oversight. • Conversely, Authorised FME and Registered FME(Nonretail) do not deal with retail money and have limited investors and larger ticket size, which simplifies fund management processes and involve lesser risk. These FMEs have successfully managed their operations and complied with regulatory requirements with only 2 KMPs. • Accordingly, requirement of appointing additional KMP for Authorised FME and Registered FME (Non-retail) should not be imposed to enhance ease of doing business and reducing undue operational and financial pressures. 310 7(5) Certification requirement for employees of FME • FMEs are required to appoint Principal officer and • To enhance ease of doing business, it is Compliance officer who oversee fund management recommended to not mandate the requirement and overall compliance respectively. Further, of undergoing certification(s) to the employees of Registered FME FME. (Retail) is also required to appoint additional KMP for fund management. • The KMPs possess the requisite educational qualification and experience as mandated by the FM Regulations to fulfill their roles effectively and are well-equipped to undertake their duties. • Given the requisite educational qualification and experience of the KMPs, imposing further additional certification requirements on such KMPs shall lead to unnecessary operational burden on the KMPs. • Further, other employees (i.e. employees which are not KMPs) handle operational and routine tasks like processing transactions, accounting and maintaining records, customer relationship, etc. Mandating certification for such employees does not align with their supportive and routine roles and functions. The costs and resources required for certifying all employees shall outweigh its benefits. • To enhance ease of doing business and reduceoperational burden on the employees, certification requirement for employees of FME should not be mandated. 311 7(4)(b) Minimum experience requirement for the role of • The minimum period of experience for the role of Principal and Compliance officer compliance officer has been relaxed only for company secretaries from 5 years to 3 years. It is suggested to also reduce the minimum experience requirement for the role of principal • Chartered Accountants and cost accountants have officer as well as compliance officer for members a deep understanding of financial systems, of the Institute of business regulations and tax laws. Their expertise Company secretaries of India, the Institute of enables them to navigate the complex landscape of Cost Accountants of India, the, the Institute of compliance with a high degree of proficiency. Chartered Accountants of India (‘ICAI’) or any institution equivalent thereto in foreign • Chartered Accountants and cost accountants jurisdiction, who has experience in financial possess extensive knowledge of laws, statutes, and services entity or has been part of compliance or risk management including internal controls and risk management in an entity regulated by a overall compliance. Their expertise in financial financial sector regulator or a listed company. matters enhances their ability to manage compliance and reporting requirements effectively. • Alternatively, the experience criteria applicable Chartered Accountants are well to the principal officer and compliance officer suited for compliance roles like company may be considered to be altogether removed secretaries. and alternative eligibility criteria may be • Accordingly, the relaxation provided to company introduced such as such individual/s clearing secretary for the minimum experience period should NISM certification courses, specifically designed be extended to chartered accountants and cost for IFSC regulatory regime. accountants (who are member of their respective institute) for the role of compliance officer as well as principal officer . • Further, getting an experienced resource in IFSC is currently a challenge and hence it is proposed that IFSCA may consider alternative eligibility criteria for principal officer and compliance officer to encourage ease of business. It is submitted that such alternative arrangements (like an exam requirement as an option to meet eligibility norms) may provide flexibility to the FME entities to engage appropriately qualified professionals.312 9 Fit and proper requirements: • IFSCA has proposed to revise the timeline for declaring a person as “fit and proper” after the • To consider reducing the proposed five-year expiration of the period mentioned in the order disqualification period to the original three-year passed by a regulatory authority. At present, under period to enhance ease of doing business within the FM Regulations, an entity is restricted from the IFSC. being considered as a 'fit and proper' for a duration of 3 (three) years following the expiration of the validity of such a regulatory order. • It has been proposed under the consultation paper that a timeline of 5 years from the date of such order is prescribed in case no specific period is given in such regulatory order. We understand that the proposed alignment of the ‘fit and proper’ provisions with the timelines specified in the order is based on the ‘principle of proportionality.’ However, the suggestion to extend the disqualification period to 5 (five) years in cases where no specific timelines are provided, is not in the best interest of the person against whom such order has been passed by the regulatory authority. • Generally, in the recent orders passed by the SEBI, it has been observed that the person is barred for maximum period of 1 (one) year from the securities market and considering the current timeline given in extant regulations, the person would not be considered as fit and proper for a total of 4 (four) years from the date of such order. However, with the proposed amendment, in case no period is mentioned in the order, then such person shall be barred for a total of 5 (five) years from the date of such order. This may create substantial challenges for market participants seeking to enter or operate within the IFSC framework. • With the intent of IFSCA’s ongoing efforts to develop a competitive regulatory regime with other developed jurisdictions, IFSCA may consider relaxing the proposed 5 (five) year disqualificationperiod and making it similar to the original 3 (three) year period to enhance the ease of doing business within the IFSC. 313 19 & 31 • IFSCA has proposed via the consultation paper, to Lower scheme filing fees in case of delay in extend the validity of placement memorandum from declaring first close of the Scheme 6 (six) months to 12 (twelve) months from the date of its filing with IFSCA, and additionally provided To consider reducing the scheme filing fee, that on failure of the FME to declare first close of the limiting it to concessional rates in case if the FME scheme by achieving the minimum corpus provided fails to declare the first close within the stipulated under the FM Regulations within the stipulated timeframe provided under the FM Regulations timeline of 12 (twelve) months, the FME would be for ease of doing business perspective. required to refile the placement memorandum by paying the full fee as applicable to the scheme. • While we understand and appreciate the IFSCA’s intent to align these provisions with SEBI’s framework (which prescribe a timeline of 12 (twelve) months for first close of the scheme, failing which AIF is required to file a fresh application with SEBI by paying full fee as applicable on filing of a new scheme), unlike SEBI which permits a lower fee of INR 1,00,000 for launching a new scheme, the IFSCA’s fee’s structure for scheme filing is considerably high (i.e., USD 7,500, USD 15,000 and USD 22,500 as applicable). • In this regard, we request that IFSCA may consider reducing the application fee for re-filing of scheme, limiting it to concessional rates in case the scheme fails to declare the first close within the stipulated timeline.314 28 & 40 Removal of maximum ceiling limit for • One of the conditions for non-applicability of cap contribution by the FME or its associate in the on the contribution by the FME or its associate in Venture capital scheme and Restricted scheme the Scheme is that the FME and its associate, in certain cases wherever applicable, are not Indian resident and do not have any Indian resident as their ultimate • It is suggested to clarify the definition of the beneficial owners (emphasis applied). term ‘Indian Resident’ to mean a ‘person resident in India’ as per the Foreign Exchange • However, the term ‘Indian resident’ is not defined Management Act, 1999. in the proposed amendment. The meaning of the term ‘India resident’ is different in various statutes • It is suggested to remove the proposed 33% like FEMA, income tax. (thirty three percent) limit for investing in an investee company and associates of such • Accordingly, to provide clarity, the term ‘Indian company in the proposed amendment. Resident’ should be defined in the FM Regulations to mean a ‘person resident in India’ as per the Foreign Exchange Management Act, 1999. • Under the current Indian regime, several restrictions, limitations and conditionalities are applicable on foreign investments in India. Therefore, keeping an additional limit of 33% (thirty three percent) would not achieve the objective of ease of doing business. • Additionally, we have not seen such stringent limits being provided in any developed jurisdiction like Singapore, Mauritius or Dubai. • Accordingly, the proposed 33% (thirty three percent) limit for investing in an investee company and associates of such company in the proposed amendment should be removed.315 35 & 47 Investment diversification norms for fund of fund • In case of a fund of fund structure, the investors schemes shall pool money in feeder fund which shall feed in the master fund, which shall make investments in • To provide parity to retail schemes in line with permissible securities. restricted schemes, it is suggested to provide exemption from investment diversifications • The investment diversification norms should be norms to retail fund of fund scheme, if the master levied only at the master fund level and not on the fund fulfills the said investment diversifications feeder fund. norms. • Exemption from investment diversification norms • Further, limit of 25% limit should be removed is proposed to be granted to open ended restricted for all Restricted and Retail fund of fund fund of fund scheme, if the master fund fulfills the schemes i.e. open ended fund of fund as well as investment diversification norms. close ended master fund. • A similar exemption from investment diversification norms is required to be provided to retail fund of fund scheme. • Further, we request IFSCA to remove such restrictions on a Restricted or Retail fund of fund scheme rather than providing exceptions only for Open ended scheme since an open-ended scheme may invest in open ended as well as close ended schemes. Further, various jurisdictions also allow open ended schemes to invest in close ended schemes with no such restriction and hence, such limitations would restrict the market participants to create a fund of fund schemes in IFSC.316 23, 35 Remove requirement of minimum Corpus Size in • IFSCA has proposed to reduce the size of the and 47 case of fund of fund structure venture capital scheme, restricted scheme (non- retail) and retail scheme to USD 3 million from USD • To consider removing the minimum size criteria 5 million). We understand that such move is being for fund of funds scheme acting as a feeder fund taken to attract the market participants who are and solely investing in the master fund. facing challenges in launching the schemes with such corpus size. • Hence, to enhance the competitiveness of IFSC and align its regulatory framework with the practices of other mature jurisdictions, it is recommended that IFSCA may consider removing the proposed minimum corpus requirement of USD 3 million) provided under the FM Regulations, for the fund of fund schemes. • Further, it may be noted that as per the FM Regulations, a fund management entity's minimum capital contribution in a scheme shall stand exempted if it invests in a scheme, which is a fund of fund scheme, investing in a scheme with similar requirements. A corollary may be drawn to the minimum corpus requirements of the fund established in IFSC, which seeks to invest solely in the master fund, and the master fund already complies with a similar minimum corpus requirement. • Therefore, we humbly request IFSCA to grant a relaxation from complying with this requirement of minimum corpus before making investments in the master fund, under for the fund of fund scheme, investing in a scheme with similar requirements. 317 8 read Clarity on investment avenues where net worth • Given the lack of clarity regarding permissible with of the FME can be deployed. investment avenues, the funds of the FME are lying schedule idle in the FME's bank account, leading to II • To provide clarity to the FMEs in IFSC, it is substantial opportunity costs. suggested to provide regulatory guidance on the • The FME should be allowed to deploy its net worthpermitted investment avenues where the net in money market as well as capital market worth of the FME can be deployed instruments in IFSC, India and foreign jurisdictions. 318 Relocatio Multi share/unit class structure for relocated • In offshore jurisdictions like Mauritius and n of funds in IFSC Singapore, funds are allowed to issue multi-class Funds shares/ units representing segregated • In case of relocation of offshore funds having portfolios/assets and liabilities for each share/unit multi share/units class structure to IFSC, it is class. suggested to allow such relocated fund in IFSC • A multi share/ unit class structure is essential for to have similar multi share/units class structure providing flexibility to investors. It caters to different types of investors with varying needs and investment goals. This structure enables the creation of different share classes within a single fund, each with distinct investment strategies, fee structures, investment portfolio and risk profiles. • In case where offshore funds having multi class structure wishes to relocate to IFSC, it will lead to commercial and operational challenges for the investors given currently such structure is not allowed in IFSC. • To provide flexibility to investors of offshore funds relocating to IFSC and promote onshoring the offshore, it is recommended to allow relocated fund in IFSC to have multi share/units class structure. 319 29 and Lack of clarity on co-investment vehicles or SPV • Currently, FME is required to launch separate 41 structure Scheme for carrying out co-investment. • IFSCA has already permitted co-investment • It is recommended that IFSCA should issue structure to Schemes in IFSC. However, due to lack detailed guidelines on co-investment by Scheme of clarity on operational aspects, industry players in IFSC through: have not implemented such structure. (1) SPV structure • Clarity on this shall enable FME players to offer co- (2) segregated portfolio by issuing same class of investment products to its investors. units 320 31 Filing of PPM with IFSCA prior to launch of • Fund raise is an integral part of the business of the Scheme and receipt of comments FMEs. Fund raise is important for implementing investments in target companies identified by the For FMEs to plan the launch of Scheme and FME. Target companies have various suitors as discuss and agree terms of the PPM with anchor investors. For FMEs to participate in any round of investors and other investors, it is imperative that investment in the target company, they need to bethe comments from IFSCA are received within a ready with the Fund in place loaded with investor specified timeline post filing the PPM. Any commitment. comments from IFSCA received post agreeing • For FMEs to have conclusive discussions with terms with investors, will lead to unwarranted investors in a time bound manner and seal their discussions commitments, the PPM needs to be crystallized with and plausible conflict with investors which could inputs from the IFSCA. Such comments need to be derail the fund raise. received in a time bound manner and post deliberations and discussions, the PPM can be rolled out to investors. • If a time -limit is not provided within which comments from IFSCA are to be received, the FMEs could potentially miss investing in the desired target companies leading to loss of credibility to close deals in the eyes of investors. 321 2(gg) Create / enable / facilitate setting up and running • For FMEs, allocation of differentiated returns and 32 of employee benefit trusts within GIFT under arising from schemes under management is of IFSCA regime utmost importance. As FMEs strengthen their presence in GIFT, senior employees and KMPs are incentivized with share in differentiated returns of schemes under management. A common way of structuring such share in differentiated returns is an employee welfare / benefit trust. Currently, there is no enabling framework for creation of such trusts and allotment of differentiated returns to such trusts. • Start -ups and growth companies incentivize their employees and KMPs by way of ESOPs / MSOPs. Typically, such ESOPs / MSOPs are settled in a trust and are tagged with eligibility and vesting conditions. As companies grow, the trust becomes a vehicle for keeping ESOPs / MSOPs rolling over years and across various levels of employees and KMPs. This is a common practice amongst various listed companies.322 Relocatio Relaxations required to facilitate relocation of • Any Offshore Fund which is in existence, would n of offshore pooling vehicles to GIFT - IFSCA have an agreed set of commercials, investment Funds strategy, commitments at inception and • Permit offshore funds to relocate to GIFT with operationalised drawdowns and investments. the existing commercials agreed with investors Increasing commitment of any investor at the time and offshore manager / advisor of relocation will result in distorting the fund • Relaxation from minimum commitment to construct, unit / share capital structure, agreed existing investors commercials and could adversely affect IRR and derail relocation to GIFT • For existing offshore funds, commitment of investors may be below the minimum requirement of USD 150,000 as per FM Regulations. Also, such funds may be well past the final closing and therefore any change in commitment will distort the fund construct. • While funds dealing in listed securities have relocated to GIFT, VC / PE funds are yet to attempt relocation to GIFT. If the relocation framework supports the above, it should open flood gates for such funds to actively consider relocating to GIFT. • The relaxations will also act as a catalyst for SWFs, offshore institutional fund managers (being LPs of PE / VC funds) to familiarize themselves with GIFT and IFSCA regimes and consider relocating existing vehicles / setting up new fund vehicles in GIFT.323 2(gg) Removal of ceiling for number of investors in • Removing the ceiling on the number of investors and 32 restricted scheme allows funds to operate more smoothly, as they are not required to launch a new scheme when the • It is recommended to remove the ceiling on the number of investors exceeds the threshold of 1,000. number of investors in the restricted scheme. • For investors, this change is advantageous because it eliminates regulatory barriers, enabling them to invest in their preferred funds that align with their risk-return preferences. Currently, if a fund reaches its investor limit, new investors are prevented from onboarding in the fund. • Overall, removing the ceiling offers investors more alternatives and provides fund managers with greater regulatory flexibility. 324 7 Appointment of Principal Officers and Key • Under the extant regulations, any change in KMP managerial personnel(s) (KMP) of a FME (including the PO and CO) registered under the FM Regulations requires prior approval • It is suggested to consider eliminate the current from the IFSCA, accompanied by a fee of USD 250 requirement of obtaining consent from IFSCA for (United States Dollars Two Hundred and Fifty), as change in KMP of the FME set up in IFSC. outlined in Schedule II of the May 2023 Circular referred in the preceding column. • Due to lack of manpower in the IFSCA and intense competition between various FMEs established in IFSCA inter -se, we have witnessed scenarios, where such KMP have resigned from the FME within few days of FME getting approval from the IFSCA or launching the schemes, thereby leaving the FME without adequate manpower to run its activities. While there should be adequate checks and balances for such FMEs to appoint these KMP as soon as possible, additional safeguard like prior permission from the IFSCA for effecting such change in KMP should be reconsidered. • It is important to note that the roles of the KMP of a FME are comparable to those of the key investment team members of an investmentmanager. Our suggestion given in the above paragraph are in line with the extant SEBI regime (as provided under the SEBI (Alternative Investment Funds) Regulations, 2012, where only intimation to SEBI and investors is required for changes in the key investment team. The aforesaid provisions of the SEBI Master Circular for Alternative Investment Funds dated May 07, 2024 is reproduced below for your reference: • “13.1.2. For the purpose of provisions of AIF Regulations, ‘key management personnel’ shall mean: (i) members of key investment team of the Manager, as disclosed in the PPM of the fund; (ii) employees who are involved in decision making on behalf of the AIF, including but not limited to, members of senior management team at the level of Managing Director, Chief Executive Officer, Chief Investment Officer, Whole Time Directors, or such equivalent role or position; (iii) any other person whom the AIF (through the Trustee, Board of Directors or Designated Partners, as the case may be) or Manager may declare as key management personnel. • 13.1.3. AIFs shall disclose the names of all the key management personnel of the AIF and Manager as specified in para 13.1.2 above, in their PPMs. Any change in key management personnel shall be intimated to the investors and the Board.” • In light of this, we respectfully suggest that IFSCA may consider revisiting the approval requirement for change in KMP of the FME.325 22, 34 Warehoused investments and proprietary • Although, through consultation paper, IFSCA has and 46 trading proposed the clarification on the jurisdiction of these permitted investments, no clarity has been provided • To seek clarification as to whether (i) the funds as to whether the FME can (i) make the warehoused set up under the FM Regulations could engage investments, and (ii) carry out proprietary trading, in warehoused investments and (ii) the FME with appropriate disclosures to investors of the incorporated in IFSC could carry out proprietary funds as provided in the private placement trading, with appropriate disclosures to investors memorandum. of the funds in the private placement memorandum. • Warehousing and proprietary trading are important for FME to tap on capitalization of market opportunities. Warehousing allows the FME to secure assets at advantageous prices, thereby mitigating the risk of price volatility before the assets are incorporated into the fund. • The lack of explicit regulatory guidance on these investment strategies can potentially impact FME’s operational efficacy. It is, therefore, imperative that IFSCA, provide unequivocal guidelines regarding the permissibility of warehousing investments and proprietary trading by FMEs. Such regulatory clarity would ensure that all FMEs operate within a uniform framework, thereby enhancing transparency and safeguarding investor interests.326 31 Timeline for filling revised PPM in case of • Under the extant FM Regulations, any material material change changes in the information of the PPM should be immediately informed to the IFSCA by the FME. • It is suggested to provide a timeline for filing the This is onerous provisions, as during the fund revised placement memorandum in case of any raising, due to the negotiations with the investors, material change in the information provided in PPM undergoes a lot of changes and filing a revised the placement memorandum. PPM immediately after the changes is made is creating operation havoc for the FME. • Reference can be taken from the SEBI (AIF Regulations), 2012 which provide that changes in the information in the PPM and other terms of the fund document can be submitted within 1 month from the end of each financial year. • Hence, we request IFSCA to provide a certain timeline within which such changes in the information provided in the PPM should be filed by FME with IFSCA.327 No express prohibition on issuance of primary • This model has also been promoted by Hon’ble and secondary classes of units to the investors. Finance Minister Nirmala Sitharaman, in both the Union Budget 2022 and in Union Budget 2024, • It is our recommendation to permit funds in which advocates the blending of (concessional) IFSC to issue primary and secondary classes of capital to increase the amount of private capital units wherein distributions to the holders of the invested in various sectors, such as high impact secondary class units are made only after the climate and sustainable development focused obligations towards the holders of the primary businesses and innovations. class units are met. • Such models are permitted in various other global • To protect the interest of the investors, the jurisdictions as well. For instance, the U.S. Court of following safeguards can be introduced: (i) the Appeals (Fifth Circuit of New Orleans) has rejected distribution model should be expressly disclosed the Securities and Exchange Commission’s (“SEC”) in the PPM; and (ii) only institutional investors or ‘Private Fund Advisers Rule’ (“Rule”) which among accredited investors should be permitted to other restrictions intended to stop giving some subscribe to the secondary class units investors preferential treatment over redemptions and preferential information about portfolio holdings. The Court held that such rules weren’t necessary for the “highly sophisticated” investors and such strictures should not be applied for private funds. Other offshore jurisdictions (such as Singapore) permit a similar payout model too, as long as its appropriately disclosed and all the investors are aware of the same (including commercial implications of such arrangements on different set of investors), at the time of their onboarding. • Therefore, IFSCA may consider permitting such structures in IFSC 328 6 Track Record and Reputation of Fairness This change aims to provide ease of doing business Our suggestion/ recommendation: by ensuring that applicants with multiple individuals • To improve the ease of doing business, it is having adequate experience in the financial recommended that the requirement for at least services sector and controlling the FME are able to one individual to be in control of FME and set up in IFSC. Extending the shareholding holding more than twenty-five percent (25%) requirement to groups of shareholders collectively, shareholding in the FME should be extended to rather than just a single individual, broadens the include groups of individuals or persons acting in pool of qualified stakeholders. This adjustment is concert collectively holding more than twenty- likely to foster more knowledgeable andfive percent (25%) shareholding and having experienced management, leading to better control in the FME, with each of the individual decision-making and potentially enhanced stability also having at least five (5) years of experience and trust in FMEs, which can attract more investors. in financial services. 329 6 Track Record and Reputation of Fairness This proposal aims to serve the dual purpose of Our suggestion/ recommendation: enabling new generation fintech companies without To provide ease of doing business and ensure prior experience to get a license, while still ensuring adequate safeguards, it is recommended that that adequate safeguards are in place for entities the criteria for soundtrack for new generation obtaining an FME (Retail) license. This may be akin fintech companies should be to have a higher to the regulation 21 of the SEBI (Mutual Fund) networth say for instance, USD 3 million as Regulations, 1996, which provides for a higher opposed to USD 1 million in case of other networth requirement for Asset Management Registered FME (retail) entities. Companies that are unable to satisfy the routine track record criteria. 330 35(2) Minimum size of the restricted schemes: Our view: The proposed consulting paper recommends the minimum size of the Restricted Schemes to be USD 3 Million from the erstwhile USD 5 Million. This is a welcome move and will now allow the fund managers to launch the AIFs in GIFT IFSC and operationalise it quickly. 331 77(1) Minimum investment requirement under PMS: Our View: The proposed consulting paper suggests a minimum investment amount under PMS of USD 75,000 from USD 150,000. We sincerely appreciate the change in the regulation. This move will help wider participation from the investor community bringing in more capital infusion through GIFT IFSC jurisdiction. We are glad that the Regulator is considering the proposed changes that will compliment the global minimum threshold investment limits. This will allow more capital movements through the IFSC jurisdictions than the erstwhile offshore jurisdictions. 332 77(2)(ba) Direct funding by the investors to the prime broker’s account:Our View: The proposed consulting paper suggests that the client can maintain funds with a specific account of the client maintained with a regulated broker dealer in IFSC, India or a Foreign jurisdiction. We sincerely appreciate the proposed change to enable direct transfer of the funds from Clients personal bank accounts to the account of a broker-dealer without having the requirement of opening up a separate bank account. The proposed move shall remove the operational hurdles which are being currently faced by the clients as well the FMEs and lead to an increase the pace of onboarding the clients and smoothly carrying out business transactions. 333 47(3) We recommend providing an exception to this InvITs & REITs inherently hold a well-diversified provision for retail schemes investing exclusively portfolio of assets, addressing diversification criteria in InvITs & REITs. at the trust level itself. In case an InvIT holds an asset portfolio of at least 10 separate Assets (Concession Agreements) the diversification criteria should be considered as met. Consequently, imposing a cap at the scheme level can be restrictive and unnecessary. 334 47(4) We recommend providing an explanation stating Definition for thematic schemes should clearly that the schemes investing exclusively in InvITs include schemes investing in InvITs or REITs or REITs would be considered as Thematic exclusively to avoid ambiguity. schemes and hence won’t be subject to limits on sectoral cap. 335 32(1) & 1) It is suggested to reduce the minimum amount The minimum investment criteria have been 32(2) of investment of USD 150,000 in case of highlighted as a hinderance for launching schemes restricted scheme. in IFSC. Due to this restriction, several investors 2) Restricted schemes shall not have more than who plan to invest are detracted from opting IFSC one thousand (1000) investors as their base. The Base trading lot for units of a privately placed InvIT is being reduced to Rs.25 Lakhs. It is suggested that the trading lot be aligned to this trading lot size i.e. approx. USD 30,000.It is also to be factored that we would also be reaching out to accredited Investors who could be permitted to invest with lower investment thresholds. 336 47(1), Clause 47(1) and (2) of the IFSCA (Fund 47(2) Management) Regulations, 2022 (“FME Regulations”), prescribes the following investment criteria for a Retail scheme: -In case of open-ended schemes, the maximum investment in unlisted securities should not exceed fifteen percent (15%) of the total Asset Under Management (AUM) of the schemes. -The minimum amount of investment by an investor in case of close ended schemes investing more than fifteen percent (15%) in unlisted securities, shall be USD 10,000. It would be relevant to note that schemes of Mutual Funds which are regulated by The Securities and Exchange Board of India (SEBI) may be considered as unlisted securities. Accordingly, there exists an ambiguity whether Retail Funds launched in GIFT IFSC as feeder funds would be permitted to invest in domestic mutual fund schemes in excess of the limits prescribed as per Clause 47(1) above. It is therefore recommended that the term unlisted securities be replaced with securities of an unlisted company, which will then exclude such feeder retail funds in GIFT IFSC from the investment restriction criteria as per Clause 47(1) above. This recommendation is also in line with Clause 35 (1) of the FME Regulation for restricted schemes (non-retail), which provides that foropen ended non-retail schemes, the maximum investment in securities of unlisted companies should not exceed twenty- five percent (25%) of the corpus of the schemes. 337 6 Reduction of Experience Requirement: Lack of Vintage but Proven Expertise: We propose reducing the experience While most non-retail FMEs and their Indian requirement for Retail FMEs from five years to counterparts (including AIFs) possess significant three years, which would allow newer and experience managing large AUM, they may not innovative fund managers to enter the market necessarily meet the five-year experience while ensuring adequate investor protection. requirement. These FMEs do, however, have the expertise of operating in a regulated environment Reduction of Investor Base Threshold: and managing sophisticated investors such as NRIs We recommend reducing the minimum investor and foreign individuals—who are also the primary threshold from 25,000 to 2,500. It is worth target audience for retail schemes in IFSCA. considering that AIF-promoted non-retail FMEs are regulatorily restricted to reach more than Operational Capabilities via RTAs: 1,000 investors per scheme. Therefore, they are Indian AMCs, most AIFs, and non-retail FMEs inherently in an disadvantageous position to already use the services of Registrar and Transfer compete in number of client criteria. Agents (RTAs) and professional Administrators for onboarding and servicing investors. The same infrastructure and services can be leveraged to efficiently manage a larger investor base under the proposed Retail FME framework by new age Retail Funds. Fostering Innovation for Targeted Investor Needs: Currently, many non-retail FMEs primarily act as feeders to Indian AMCs and their mutual fund schemes, limiting innovation and the ability to cater to the specific needs of target investors. If non- AMCs are permitted to take Retail FME licenses, they will likely introduce more diversified investment options and create tailored schemes, particularly for NRIs and foreign investors.IFSCA Response: During the public consultation, comments were received from various stakeholders. The proposal was suitably modified based on the comments received from the stakeholders and placed before the Fund Management Advisory Committee (FMAC). Pursuant to recommendations of FMAC, the revised proposal was placed before the Authority in the meeting held on December 19, 2024. The comments received from the stakeholders were also placed before the Authority.