Appointment of KMP: new process for fund management entities

On February 20, 2025, the International Financial Services Centres Authority (IFSCA) issued a circular to all Fund Management Entities (FMEs) operating within IFSCs, regarding the appointment and changes to Key Managerial Personnel (KMPs). This regulatory directive clarifies the procedure and responsibilities FMEs must follow to ensure compliance with the newly outlined regulations concerning KMP appointments. This move aims to strengthen governance and operational efficiency within fund management entities registered in the IFSCs.

1. Regulatory Framework for KMP Appointment: The circular references Regulation 7 of the IFSCA (Fund Management) Regulations, 2025. It emphasizes that FMEs are required to appoint KMPs who meet specific educational and professional criteria outlined by the Authority. The regulations also mandate that any change in KMPs must adhere to the prescribed process set by the IFSCA.
2. Formal Intimation Process: FMEs are now required to notify the IFSCA when proposing to appoint or change a KMP. This intimation must be filed in a prescribed format, along with the payment of the applicable fee. For applications regarding KMP appointments or changes that were pending approval before the issuance of this circular, FMEs must refile them in accordance with the new procedure, along with proof of any fees already paid.
3. Timely Approval and Feedback Mechanism: Once an FME files the intimation, the IFSCA has committed to providing feedback within seven working days. This ensures that the FME can proceed with its plans for the appointment or change of a KMP promptly while ensuring compliance with the regulations.
4. Eligibility and Accountability: Both the FME and the individuals in control of the FME bear the responsibility for ensuring that the appointed KMPs meet the eligibility criteria set by the IFSCA. This includes fulfilling qualifications and experience requirements as well as adhering to the prescribed standards of governance.
5. Filling Vacant KMP Positions: The circular sets clear guidelines for the prompt filling of vacant KMP positions. If a KMP position becomes vacant, the FME must identify a suitable replacement and file the intimation with the IFSCA within three months of the vacancy. Furthermore, the position should not remain vacant for more than six months. This ensures that there is no prolonged disruption in leadership and decision-making within FMEs.
6. Governance and Operational Planning: FMEs are encouraged to develop structured recruitment and succession plans for their KMPs. This proactive approach will ensure that the organization is well-prepared to handle any personnel changes efficiently. Maintaining adequate manpower in key positions is crucial for the smooth operation of the FME and to sustain its compliance with regulatory norms.