OVERVIEW: 

• The International Financial Services Centres Authority (IFSCA) has taken significant steps to simplify Scheme/Fund launches for the fund management ecosystem in the IFSC, GIFT City.

• IFSCA has issued a circular dated April 5, 2024, on “Ease of doing business – Filing of Schemes or funds under IFSCA (Fund Management) Regulations 2022” which has simplified the process for launching of funds and schemes in GIFT City.

• The IFSCA outlines minimum disclosures required for a Scheme/Fund in its Private Placement Memorandum (PPM)

• The newly simplified process provided by IFSCA circular applies to all scheme under the FM regulations except Retail schemes

• Prior to this, in the case of Restricted Schemes, Regulation 31(2) of the FM Regulations required FMEs to wait for IFSCA’s comments (if any) and ensure that these comments were incorporated in the PPM before proceeding with the launch.

• The ‘green channel’ route whereby FMEs were permitted to launch schemes immediately on filing of the PPM was available only to ‘Venture Capital Scheme’ and Restricted Schemes that solicited money only from accredited investors.

WHAT DOES IT SAY?

• It has been decided that all schemes or funds launched under chapter III (except Part C: Retail Schemes) of the Fund Management Regulations will require submission of a Private Placement Memorandum (PPM) along with other necessary documents to the Authority. These documents must ensure minimum disclosures and meet other outlined requirement.

• Once these documents are filed and all stipulated requirements are met, the Fund Management Entities(FMEs) may proceed to launch their respective schemes.

• IFSCA will establish a web portal for filing scheme documents before an offer is made, further facilitating the process

• The Scheme or Fund documents shall be submitted with Authority in Application Form specified in the circular.

• The FME shall ensure that the PPM of each Scheme or Fund, inter-alia, contains the following minimum disclosures:

          1. A detailed illustrative/ diagrammatic/ graphical representation of the Scheme or Fund Structure;

         2. Broad details of the target investors and the portfolio investments;

• Additionally, when filing schemes documents with the IFSCA, FMEs are required to provide a declaration to the effect that all relevant disclosures, material to the scheme or Fund, have been disclosed in PPM.

UPDATED SCHEME APPLICATION FORM:

The IFSCA Circular also provides an updated scheme application form in which the following changes have been made:

• The requirement of providing the SEZ letter of approval is expressly provided in the form

• The reference to the scheme being launched in the form of a body corporate has been removed

• All fees charged to the investors by the fund are to be disclosed in the form. Earlier it was limited to the free being charged to the fund by the FME.

CONCLUSION:

• This Circular issued for the fund management ecosystem will attract more fund management entities contemplate launching schemes in the IFSCA due to the single window clearance and minimum disclosure requirements in the PPM.

• This initiative aims to enhance transparency, investor confidence, and efficiency in the fund management ecosystem within the IFSCA.