Fund Management - FMEs, Scheme Categories and LRS Limits
What this domain tests
Fund management questions test the IFSCA (Fund Management) Regulations, 2022 - one registration regime for fund management entities (FMEs), the scheme categories they may launch, and the boundary with SEBI's AIF regime.
Core rules
- A fund manager must be registered with IFSCA as an FME; once registered, its IFSC-domiciled schemes do not need a parallel SEBI AIF registration.
- Scheme categories include venture capital, private equity, debt, money market, exchange-traded and retail schemes, plus the Family Investment Fund (FIF) for single-family money.
- Retail schemes carry heavier obligations than private schemes: higher net-worth thresholds for the FME, tighter disclosure, valuation and investor-protection conditions.
- Schemes are USD-denominated; an INR scheme defeats the purpose of the IFSC.
- Indian residents may invest only within the Liberalised Remittance Scheme (LRS) ceiling of USD 250,000 per person per financial year, and the FME must not make a public offer in India.
- Key-personnel, fit-and-proper and scheme-filing requirements apply at each launch.
Worked example
An FME plans a USD 40 million private equity scheme: three Indian residents at USD 200,000 each, with 20 offshore investors providing the balance. It works. The private equity category fits a closed-end, non-retail pool; each resident's USD 200,000 sits inside the USD 250,000 LRS limit; no public offering is made in India. If the FME instead wanted 500 retail investors with quarterly redemptions, retail-scheme conditions (higher net worth, disclosure, liquidity) would apply and this structure would fail.
Traps that cost marks
Assuming SEBI and IFSCA registration are both required; assuming a registered FME can launch any scheme with no scheme-level filing; ignoring the LRS cap when a resident investor is involved; confusing an FIF (one family) with a private equity scheme (unrelated investors).