Regulations strengthen Gift City funds industry


The International Financial Services Centres Authority (IFSCA), which regulates Gift City, India’s first international financial services centre (IFSC), plans to introduce single registration for all fund management activities and provide a green channel for non-retail schemes.

The regulator has proposed the IFSCA (Fund Management) Regulations 2022 to provide a roadmap for the funds industry in IFSCs and to institute a consistent regulatory framework for investment funds based on global best practices. It has sought public comments on the proposed regulations.

The SEBI proposes seeking a single unified registration from the IFSCA for all managers intending to conduct various activities related to fund management, such as managing retail schemes (including exchange-traded funds) and non-retail schemes (alternative investment funds), launching portfolio management services, or managing various investment trusts (REIT and InvIT).

A special registration with lower requirements has been proposed for fund managers intending to invest in unlisted securities of startups, emerging or early-stage companies mainly involved in new products, new services, and technology through a venture capital scheme in Gift City.

Under the green channel, venture capital schemes or non-retail schemes soliciting money from accredited investors can open for subscription by investors immediately after filing with the IFSCA.

It has also proposed establishing a regime to promote family offices for managing and preserving the wealth of high net-worth individuals and their families. Fund managers also will be permitted to set up self-managed investment funds for families and manage portfolios for multi-family offices.

The regulation proposes allowing fund managers in IFSCs to launch active exchange-traded funds (ETFs) and commodity-based ETFs apart from index-based ETFs. Fund managers for gold and silver ETFs shall be able to invest directly in bullion depository receipts with underlying bullion, thereby eliminating the need to invest in physical bullion and worry about quality or storage.

It has also prescribed a framework to launch special situation funds that can invest in stressed assets in the IFSC.

The draft regulations propose setting a fund lab for aspirational fund managers to try new strategies in a controlled manner. Fund managers shall be permitted to create SPVs under the main scheme to co-invest or leverage along with the fund or scheme subject to certain conditions. Retail close-ended schemes to invest in unlisted securities, allowing retail participation in private markets, have also been proposed.