Governance and oversight of Schemes in IFSC - Segregation of the role of Fiduciaries

International Financial Services Centres Authority, vide Circular No. F. No. IFSCA-IF-10PR/7/2024-Capital Markets/10042026 dated April 10, 2026, has announced an important update regarding governance and oversight of schemes in IFSC through segregation of the role of fiduciaries.

Key Details of the Update –
• The circular refers to regulation 17(2) of the International Financial Services Centres Authority (Fund Management) Regulations, 2025, which requires Fund Management Entities to appoint fiduciaries for schemes structured as a trust, company, or Limited Liability Partnership, depending on the legal form of the scheme.
• It also refers to regulation 17(5) of the FM Regulations, under which fiduciaries are required to comply with the Code of Conduct and obligations in the Third Schedule, including duties to maintain high standards of service, exercise due diligence, ensure proper care, and apply independent professional judgment.
• The circular clarifies that a Fund Management Entity shall not appoint an entity acting as a fiduciary to a scheme to also provide fund administration, valuation, audit, and lending or financing services to that same scheme, whether directly or through its associate.
• This clarification establishes a clear segregation of roles in the governance structure of schemes in IFSC, with the apparent objective of reducing conflicts of interest, preserving independence of fiduciaries, and strengthening oversight standards for scheme operations.
• The restriction applies not only to direct service arrangements but also to arrangements undertaken through associates, indicating that the Authority intends to prevent indirect circumvention of the fiduciary independence requirement.
• For schemes that have already been taken on record by the Authority or have been filed with the Authority as on the date of issuance of the circular, specific transitional compliance steps are required within the prescribed timeline.
• The circular has been issued under sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, read with regulation 146 of the International Financial Services Centres Authority (Fund Management) Regulations, 2025, and comes into force with immediate effect.

Actions if Any –
• Fund Management Entities must ensure that an entity acting as fiduciary to a scheme is not engaged in providing fund administration, valuation, audit, or lending/financing services to that scheme, whether directly or through an associate.
• For schemes already taken on record or filed with the Authority as on April 10, 2026, Fund Management Entities must take necessary steps to align existing arrangements with the segregation requirement prescribed in this circular.

Compliance Deadline –
For schemes already taken on record by the Authority or filed with the Authority as on April 10, 2026, the necessary steps to comply with the segregation requirement must be completed by September 30, 2026. The circular itself comes into force with immediate effect from April 10, 2026.