The International Financial Services Centres Authority (Fund Management) (Amendment) Regulations, 2025, were notified on July 24, 2025, introduing Part D: Third-Party Fund Management Services in the IFSCA (Fund Management) Regulations, 2025 (“FM Regulations”).
“Third-Party Fund Management Services” or a “Third-Party Fund Management Arrangement” refers to the activity wherein a Registered Fund Management Entity (“FME”) manages schemes on behalf of a third party. This establishes a formal legal framework for delegated/outsourced fund management within IFSC.
Key features of the Amendment:
Authorization from the IFSCA
A Registered FME must seek specific authorisation from IFSCA before providing third-party fund management. Further, the Registered FME remains fully liable for obligations and liabilities in connection with third-party fund management arrangement.
The Registered FME must be established in IFSC as a Company, or LLP, or other permitted form as may be communicated by the IFSCA from time to time. The regulations stipulate that In case of a company, its Memorandum of Association (MOA), and in case of a LLP, its limited liability partnership agreement, shall contain a provision enabling it to offer third-party fund management services.
Governance & Key Personnel
Each scheme under third-party management arrangement must have a dedicated Principal Officer who shall be responsible for the overall activities of that scheme. The Compliance Officer requirements differ between Non-Retail and Retail FMEs and for the appointment of additional KMP, AUM of such schemes counts towards KMP requirements.
Net Worth Requirement
Additional USD 500,000 net worth to be maintained at all times. This is over and above other minimum net worth requirements for the Registered FME for its usual activities as per the authorisation.
Scheme Restrictions
An FME may manage Restricted Scheme(s) under a third-party fund management arrangement, provided that the corpus of each such scheme does not exceed USD 50 million (or such other limit as may be prescribed by IFSCA). For the purposes of regulatory compliance, a third-party fund manager engaging an FME shall be deemed to be an associate of the FME, and all obligations applicable to transactions with associates under the FM Regulations shall apply accordingly.
Eligibility of Third-Party
- Must be incorporated in India, IFSC, or a foreign jurisdiction.
- Shall have adequate resources and experienced personnel.
- Officers, KMP, and controlling shareholders must be fit and proper.
Disclosures to Investors
FMEs must disclose, prominently in placement memorandum the details of the third-party and its key persons. Additionally, the segregated responsibilities of FME and third-party, potential conflicts of interest and mitigation measures and any other disclosures as may be specified by the IFSCA from time to time.
Risk Management Framework
The FME shall capture in its internal risk management policy the unique risks of third-party arrangements. Furthermore, the risk management measures to include segregation of funds and operational independence and extension of investor complaint redressal mechanisms to such schemes. Periodic internal audits & fiduciary reporting as required under the FM Regulations is mandatory.
Obligations of FME are outlined in as such:
- Ensure third-party meets eligibility criteria.
- Treat such schemes as schemes of the FME.
- Liability towards investors remains unaffected.
- Monitor third-party activities and issue directions as needed.
- Maintain indemnity mechanism from third-party.
- Pay prescribed fees and comply with additional obligations.
This amendment empowers FMEs in IFSC to act as delegated fund managers for other regulated managers globally, but with strict capital, governance and compliance obligations to safeguard investor interests and maintain regulatory oversight.
In view of the same the IFSCA has published the circular on Fee structure applicable for Third-Party Fund Management Services dated September 8, 2025.
Key highlights are as follows:
- Application Fee: Payable at the time of seeking approval for providing third-party fund management services is USD 2,500.
- Registration Fee: A one-time fee payable upon registration as a Third-Party Fund Manager is USD 7,500.
- Annual Fee: USD 2,000 payable by the Registered FME for each financial year, linked to each third-party fund management services authorisation granted by the Authority. This is in addition to the flat Recurring Fee payable by the Registered FME as per the Fee Circular dated April 8, 2025 (“Fee Circular”).
- Transaction / Activity-Based Charges: Applicable for specific approvals, filings, or material modifications as outlined under the Fee Circular.
The circular can be accessed here.
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