Introduction: The International Financial Services Centres Authority (IFSCA) plays a crucial role in regulating financial activities within International Financial Services Centres (IFSCs). In a recent circular, IFSCA emphasizes the importance of maintaining net worth for Fund Management Entities (FMEs) operating within IFSCs.
Detailed Analysis: The circular, issued under the authority vested in IFSCA by the International Financial Services Centres Authority Act, 2019, addresses the obligation of FMEs to maintain specified net worth levels at all times, as stipulated in regulation 8 of the IFSCA (Fund Management) Regulations, 2022.
Under the regulation, if the net worth of any FME falls below the specified threshold, the entity is restricted from launching new schemes, onboarding new clients, or undertaking new business activities permitted under the Fund Management Regulations until the net worth is restored to the required level.
This measure aims to ensure financial stability and integrity within IFSCs, safeguarding investors’ interests and maintaining the reputation of IFSCs as robust financial centers.
Conclusion: The circular underscores the IFSCA’s commitment to enforcing prudent regulatory standards to uphold the credibility and stability of IFSCs. FMEs are urged to adhere strictly to the net worth maintenance requirements to avoid regulatory penalties and ensure seamless operations within IFSCs. For further details, the circular is available on the IFSCA website, reflecting the authority’s transparency and accessibility in regulatory matters.
*****
International Financial Services Centres Authority
Circular F.No. IFSCA-IF-10PR/1/2023-Capital Markets/2 Dated: February 16, 2024
To,
All Fund Management Entities in International Financial Services Centres (IFSCs)
Dear Sir / Madam,
Sub: Maintenance of net worth by Fund Management Entity
1. Reference is drawn to regulation 8 of the IFSCA (Fund Management) Regulations, 2022 (‘Fund Management Regulations’), which mandates the Fund Management Entity (FME) to maintain the specified net worth at all times.
2. Without prejudice to IFSCA’s power to take action for non-compliance with the aforesaid regulation, in case the net worth of any FME falls below the specified net worth, such FME shall not–
i. launch new schemes in IFSC;
ii. onboard new clients towards any of the activities or undertake new business activities permitted under the Fund Management Regulations;
till the time the net-worth is restored.
3. This circular is issued in exercise of the powers conferred under sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, read with regulation 146 of the Fund Management Regulations, and shall come into force with immediate effect.
A copy of this circular is available on the website of International Financial Services Centres Authority at www.ifsca.gov.in.
Yours faithfully
Sd/-
Pavan Shah
General Manager
Division of Investment Funds – I and New Products & Services
Capital Markets Department
Email: pavan.shah@ifsca.gov.in
Tel: +91-79-61809844
