Recalibrating the General Obligations and Responsibilities of a Fund Management Entity (FME)
The detailed operational procedures of a Fund Management Entity (FME) might include the minima duration for preserving their records, procedures for ensuring guaranteed returns, compliance rules when control changes, conditions necessary for merging schemes, obligations when providing investor information, and restrictions on other business activities. With the aim to effectively communicate to our target audience, we have undertaken a deep dive into each of these functions. Throughout this composition, we uphold the General Obligations and Responsibilities continually holding high the bar set for FME’s.
Ensuring Records Preservation
An imperative protocol is the mandate for every FME to actively maintain and safeguard the appropriate books of accounts, documents, and records. This procedure is in sync with the digital revolution, as records are kept in the electronic retrieval form. The preservation period spans from a decade during the life of the scheme to a subsequent five years culminating at the winding up of the scheme.
Ensuring Guaranteed Returns: Conditions to be met
FME’s have some strict pre-requisites that allow them to provide guaranteed returns within a scheme or an agreement for the Portfolio Management Service (PMS). This guarantee is only valid when:
- The returns are fully guaranteed by the FME themselves
- A comprehensive statement underscoring the guarantee and elucidating its details is outlined in the offer document or the agreement
- The method detailing how the guarantee will be met is clearly defined in the offer document or agreement
Compliance and Control
An often overlooked compliance requirement for FME’s when control changes occur involves seeking prior approval from the authority. A direct or indirect change in the control of the FME is the key factor here. For FME’s operating in IFSC as a branch, the approval must come from the sectoral regulator in its principal place of operations. After this approval, the IFSCA must be kept informed within fifteen days.
Merging Schemes
Dynamic maneuvers like merging, demerging, or restructuring of schemes by the FME can either be merged into another scheme or launched separately. However, these actions require the approval of the authority. FME’s should also be prepared to abide by any future guidelines issued by the authority on this subject.
Investor Information: Timelines
Understanding investor concerns, a FME is required to furnish scheme holding information at the end of each month. This initiative facilitates transparency and keeps the investors informed. If the investor makes a request for such information, the FME is expected to provide it within 10 working days.
Restrictions on Business Activities
While the main operations of a FME pertain to the management of funds, there are restrictions imposed on its other business activities. These activities must fall under the regulations, and any venture outside the stated norm requires prior approval from the authority. For a FME operating as a branch in IFSC, it must seek approval from the sectoral regulator in its principal place of operations. On receiving approval, it must notify the IFSCA within fifteen days.
Understanding and adhering to the General Obligations and Responsibilities is essential for running a successful FME operation. By systematically applying these principles and keeping a regular check on alignment, they ensure they are operating within the fundamental norms. And, ultimately, it aids the FME to maintain the steady confidence of their investors.
