OVERVIEW:

• The International Financial Services Centres Authority (IFSCA) has issued a consultation paper proposing to introduce a new framework for third- party fund management services.

• This paper specifically addresses the industry’s request foe enabling third- party fund management services, informally known as ‘Platform Play’ for funds regulated by IFSCA.

• This move comes alongside their ongoing efforts to establish a world- class regulatory environment in GIFT City.

KEY PROPOSALS:

• Introduction of Third- Party Fund Management Services: A new chapter is proposed in the IFSCA regulations to enable third-party fund management services. This allows Investment Managers/Financial Market Entities (FMEs) to manage not just their funds but also those of other clients.

• Regulatory Provisions: All FMEs registered with IFSCA will be allowed to offer these services, provided they comply with specific regulatory guidelines.

• Disclosure Requirements: FMEs must clearly disclose in the offer documents the nature of third-party fund managerment services, including potential conflicts of interest and platform play arrangements.

• Governance and Oversight: Separate Priciple Officers and compliance Officers are to be appointed for each strategy under the platform play, ensuring independent management and regulatory compliance.

• Size Threshold: Any scheme reaching USD 10 million in assets under management must transition into a distinct FME, separate from the original platform, ensuring it operates independently.

• Operation and Risk Management: FMEs must implemented comprehensive risk management frameworks tailored tot he unique risks of third- party fund management, including regular internal audits and a robust mechanism for addressing investor complaints.

IMPACT ON GIFT IFSC:

• Facilitation of Industry Growth: The introduction of third- party fund management services is expected to drive growth in GIFT IFSC’s fund management industry by allowing managers to test strategies cost-effectively and fostering innovation.

• Streamlining processes: The proposal aims to simplify the setup and opertaional processes for new funds by leveraging existing infrastructure, regulatory frameworks, and expertise.

• Encouragement of Innovation: A more flexible environmentwill allow fund managers to experiment with new strategies and products without being hindered by operaional constraints.

GLOBAL BENCHMARKING:

• Luxembourg’s Management Companies (ManCos) serve as a global benchmark for platform play.

• ManCos offer a comprehensive suite of services including fund management, regulatory compliance, administration, distribution and marketing

• The paper draws parallels with Luxembourd’s regulatory framework under the UCITS and AIFMD directives, highlighting a globally recognized structure for fund management, regulatory compliance and distribution.

CONCLUSION:

• The IFSCA’s proposed framework for third-party fund management services marks a significant step towards enhancing the regulatory environment for investment management within GIFT IFSC.

• By allowing FMEs to manage funds on behalf of clients while implementing stricter governance and oversight measures, the IFSCA aims to foster innovation and growth in the industry.

• The requirement for independent oversight at the scheme level and the migration of larger schemes to distinct FMEs ensure that investor interests are safeguarded and that operational independence is maintained.