The International Financial Services Centres Authority (“IFSCA”), in exercise of the powers conferred by Section 28(1) read with Section 12(1) and Section 13(1) of the International Financial Services Centres Authority Act, 2019, and Section 28(C) of the Securities and Exchange Board of India Act, 1992, vide Notification No. IFSCA/GN/2025/007,[1] dated July 25, 2025, has notified the Fund Management (Amendment) Regulations, 2025 (“FM Amendment Regulations”). The FM Amendment Regulations insert a new Part D under Chapter VI of the principal Fund Management Regulations, 2025, to establish a comprehensive framework governing Third-Party Fund Management Services (“TPFMS”) within the IFSC jurisdiction.
Key Regulatory Developments
- Introduction of TPFMA: Registered Fund Management Entities (“FMEs”) are now permitted to launch and manage schemes on behalf of a third-party, subject to authorisation and ongoing compliance with the provisions of Part D (Regulations 107A to 107M) of the principal Fund Management Regulations 2025. TPFMS refer to fund or scheme management undertaken by a registered FME on behalf of an eligible third-party fund manager. The ‘third-party fund manager’ must be a regulated entity in its jurisdiction of incorporation, authorised to engage in fund or portfolio management or advisory functions.
- Authorisation and Compliance (Regulation 107C): FMEs intending to provide TPFMS must obtain specific authorisation from IFSCA. Authorised FMEs: (i) remain fully liable for regulatory obligations, notwithstanding any indemnity agreements with the third-party; (ii) must maintain adequate compliance infrastructure commensurate with the scale of their operations; and (iii) shall be required to comply with any additional conditions specified by IFSCA from time to time.
- Form of Incorporation (Regulation 107D): Only FMEs incorporated in the IFSC as a company, LLP, or other permitted legal form shall be eligible. Foundational documents must specifically provide for third-party fund management activities.
- Additional Net Worth Requirement (Regulation 107F): Authorised FMEs must maintain a minimum additional net worth of USD 500,000 (Five Hundred Thousand United States Dollars), distinct from other regulatory capital thresholds applicable to their activities.
- Eligibility Criteria for Third-Parties (Regulation 107H): Third-party fund managers availing TPFMS must:
- (i) be incorporated in India, IFSC, or a foreign jurisdiction;
- (ii) allocate sufficient operational resources;
- (iii) have qualified and experienced responsible officers; and
- (iv) satisfy the ‘fit and proper’ criteria under Regulation 9.
- FME’s Ongoing Responsibilities (Regulation 107K): The FME shall be required to:
- Verify the eligibility and qualifications of the third-party;
- Assume full liability for the performance and conduct of third-parties;
- Monitor third-party operations and issue directives as necessary;
- Retain the ability to unilaterally terminate the TPFMA in investor interest or upon IFSCA’s instructions;
- Establish indemnity mechanisms to protect against liabilities; and
- Ensure timely fee payments and compliance with all additional conditions prescribed by the Authority.
- Applicability of Existing Regulations (Regulations 107L–107M): All other relevant provisions of the principal Fund Management Regulations and associated circulars apply mutatis mutandis to FMEs authorised under this framework. However, these provisions shall not apply where the parent or associate of an FME is merely providing support or advisory functions without engaging in fund management.
[1]https://ifsca.gov.in/CommonDirect/GetFileView?id=21626bde60601ef44a0ed0220163217c&fileName=92_IFSCA_Fund_Management___Amendment__Regulations__2025_20250801_0428.pdf