Regulatory framework: Panel calls for single registration of fund managers

A panel of experts, set up by the International Financial Services Centres Authority (IFSCA), has submitted a raft of suggestions — including a single registration for a firm intending to undertake a slew of activities relating to fund management — to bolster the regulatory framework for investment funds.

It has recommended that a fund manager should be able to manage retail schemes (including exchange traded funds) and non-retail schemes (alternative investment funds), undertake portfolio management services or operate as a manager to various investment trusts (REIT and InvIT) by seeking a single unified registration from the IFSCA.

Similarly, a firm wishing to manage funds or activities for non-retail investors only will have lower eligibility requirements, according to the suggestion of the panel, headed by Nilesh Shah, MD at Kotak Mahindra Asset Management Co, who is also a member of the Economic Advisory Council to the Prime Minister.

Based on the panel’s report, the IFSCA now proposes to issue the IFSCA (Fund Management) Regulations, 2022, and invites comments from public by February 28.

A special registration with light-touch requirements will be accorded to a fund manager intending to invest in unlisted securities of start-ups, emerging or early-stage companies, mainly involved in new products, new services, and technology through a venture capital scheme in the IFSC.

The panel has also stipulated detailed eligibility and regulatory requirements for fund managers, retail schemes, non-retail schemes, venture capital schemes, portfolio management services and investment trusts have been prescribed.

It has suggested that venture capital schemes or non-retail schemes soliciting money from accredited investors alone will qualify for a green channel.

It also recommended that registered fund managers in IFSC be allowed to launch not just index-based ETFs but also active ETFs and commodity-based ETFs. Fund managers for gold and silver ETFs should also be able to invest directly in bullion depository receipts with underlying bullion, thereby scuttling the need to invest in physical bullion and worrying about quality or storage.

A framework has also been prescribed for special situation funds to be launched by fund managers in IFSC to address the issue of bad loans in the banking system.