IFSCA Notifies Amendments to Implement New Rules for Third-Party Fund Management Services

The International Financial Services Centres Authority (“IFSCA”) has amended the International Financial Services Centres Authority (Fund Management) Regulations, 2025 (“FM Regulations”) to implement the decision taken by IFSCA on June 24, 2025 regarding the proposal to allow Fund Management Entities (“FME”) in the IFSC to launch and manage Restricted Schemes on behalf of overseas or domestic third-party fund managers (“Platform Play Services”).

The International Financial Services Centres Authority (Fund Management) (Amendment) Regulations, 2025 (“Platform Play Amendments”) were notified on July 24, 2025. The Platform Play Amendments have inserted a new Part D in Chapter VI of the FM Regulations which detail the rules by which an FME may offer Platform Play Services. Some of the key features of the Platform Play Amendments are as follows:

1. A FME intending to offer Platform Play Services should seek specific authorisation from the IFSCA.
2. For each third-party scheme managed by an FME, the FME has to appoint a dedicated person as the Principal Officer who shall be responsible for the overall activities with respect to that scheme, including but not limited to fund management, risk management and compliance.
3. If the FME is a Registered FME (Non-Retail), the FME’s Compliance Officer may also act as the Compliance Officer for the third-party schemes managed by the FME. In case of a Registered FME (Retail), the FME’s Compliance Officer for its Retail Schemes cannot cover third party Non-Retail Schemes and a separate Compliance Officer has to be appointed for such Non-Retail Schemes.
4. Regulation 7(4) of the FM Regulations states that any FME that is managing an AUM of at least USD 1 billion shall, in addition to the principal officer and compliance officer, appoint an additional KMP. The Platform Play Amendments clarify that for appointment of an additional KMP under Regulation 7(4), the AUM of the third-party schemes managed by the FME shall also be considered.
5. An FME seeking authorisation to offer Platform Play Services shall, at all times, maintain an additional net worth of USD 500,000 or such other amount as may be specified by the IFSCA.
6. The FME should ensure that a suitable indemnity mechanism is in place which requires the third-party manager to indemnify the FME from any potential liabilities arising from the funds managed under the third-party fund management arrangement. However, the FME shall continue to remain liable for all obligations and liabilities under such arrangement.
7. A “third-party fund manager” has been defined by Platform Play Amendments to mean and include “an entity registered or regulated, for the purposes of fund management, portfolio management, investment advisory or any other similar activity, by whatever name called, with the concerned financial sector regulator in the country of its incorporation, and which avails the third-party fund management services from a Registered FME”. An FME may provide third-party fund management services only to a third-party fund manager.
8. A third-party fund manager shall be eligible to avail third-party fund management services even if its ultimate or interim parent entity is not engaged in the fund management activities.
9. Third-party schemes managed by an FME would have to be restricted schemes and the corpus of a such a scheme cannot exceed USD 50 million.

1. The Platform Play Amendments do not expressly permit an entity which seeks registration as an FME to simultaneously seek the IFSCA’s authorisation to set up and manage schemes on behalf of a third-parties. Since Regulation 107C(1), says that “A FME intending to set up and manage schemes on behalf of a third-party shall seek authorisation from the Authority under this Part for undertaking third-party fund management services …,” suggests that the IFSCA would consider granting authorisation to set up and manage third-party schemes only to entities which are already licensed as FMEs.
2. It was unclear from the press release issued by the IFSCA pursuant to IFSCA meeting on June 24, 2025 whether the dedicated principal officer for each third-party scheme would be an employee of the FME or of the third-party fund. The Platform Play Amendments make it clear that the FME has to employ the requisite principal officer and compliance officer for each third-party scheme managed by the FME.
3. Since a “third-party fund manager” has been defined by the Platform Play Amendments to mean and include an entity registered or regulated …. with the concerned financial sector regulator in the country of its incorporation, there could be some confusion whether the manager of a fund which is exempt from registration would be eligible to seekPlatform Play Services from an FME in an IFSC under the FM Regulations. For example, Articles 3(1) and 3(2) of the European Union’s Alternative Investment Fund Managers Directive (AIFMD) exempt from authorisation various categories of fund managers based on the type of investors who have invested in the fund and the value of the assets under management. The investment manager of an AIF registered with SEBI is not licensed by SEBI. However, IFSCA treats the investment manager of an AIF registered with SEBI as a regulated entity for the purpose of determining whether the branch of such an entity can be registered as an FME. However, the investment manager of an AIF registered with SEBI has to comply with SEBI’s AIF Regulations while a fund manager exempt from authorisation under AIFM does not have to comply with the AIFMD.
4. IFSCA expects the third-party manager to “suitably” indemnify the FME against any potential liabilities arising from the funds managed by the FME under the third-party fund management arrangement. Considering that (i) for each third-party scheme managed by an FME, the FME has to appoint a dedicated person as the Principal Officer who shall be responsible for the overall activities with respect to that scheme and (ii) the FME’s Compliance Officer would be acting as the Compliance Officer for the third-party schemes managed by the FME, it is likely that the third-party manager would be hesitant to indemnify the FME. Nevertheless, an indemnity given by the third-party manager to the FME could be worded to cover any loss or expense suffered by the FME on account of:
   1. providing FME services to the third-party fund even if neither the third-party manager nor the third-party fund nor the FME have violated any applicable law or contract. Such an indemnity would apply if any regulator or third party brings a frivolous claim against the FME and such claim is finally dismissed by a competent court, but the FME incurs various expenses, including legal costs, as a result; or
   2. the third-party manager or the third-party fund violating any applicable law or the terms of their contracts with the FME. This could cover instances like the third-party fund not providing requisite KYC information relating to its investors to the FME or withholding relevant information pertaining to the investors in the third-party fund, such as the third-party fund having investors from a country which has a land border with India, causing the FME to be penalised by an Indian regulator for violation of Press Note No. 3 of 2020; or
   3. third party claims arising out of any breach of seller representations or warranties given by the third-party fund when exiting an investment. In such a case, it is likely that the FME would also be party to any litigation and would incur legal costs.

   It is also likely that the third-party manager may seek an indemnity from the FME in case the third-party fund managed by the FME suffers any loss on account of any negligence or wilful default by the FME. For example, an FME may erroneously permit an investment in Indian securities by the third-party fund, which is otherwise prohibited by law and the third-party fund may be penalised by IFSCA or any other Indian regulator as a result. The Platform Play Amendments do not prohibit the FME from indemnifying the third-party manager and/or third-party fund.

5. Regulation 107C(4) of the FM Regulations, which has been inserted in the FM Regulations by the Platform Play Amendments, states that “Notwithstanding any arrangement of FME with the third-party including the indemnification arrangement, the FME shall continue to be liable for any and all obligations or liabilities arising in connection with the third-party fund management arrangement.” Here, it is likely that the IFSCA intended that the FME would be liable to IFSCA and other Indian regulators for any regulatory breach by the third-party fund, especially since the FME’s compliance officer would be responsible for all compliances by the third-party fund. However, the newly inserted Regulation 107C(4) gives the impression that the FME would be liable to all and sundry for any liability or obligation of the third-party fund, including breach of any seller warranties provided by the third-party fund when exiting from an investment. Regulation 107C(4) of the FM Regulations makes it imperative for the FME to have a suitable indemnity from the third-party fund manager to cover such a scenario. However, an indemnity is merely a contractual clause which has to be enforced and it would have been far better if Regulation 107C(4) of the FM Regulations was restricted to the regulatory liabilities of the third-party fund and the third-party fund manager.

The Platform Play Amendments can be found here