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CS Professional · IFSCA - Regulations, Listing and Compliances · Fund Management Services

The investment manager of a fund in GIFT IFSC wants to invest part of the scheme's money in debentures issued by a company in the manager's own promoter group. Which statement best reflects the regulatory approach?

An investment in a promoter-group company's debentures is a related-party transaction. It can only be considered with proper disclosure to investors and conflict-of-interest safeguards, and it must fit the scheme's documents and the regulations. It is neither freely allowed nor absolutely banned in every case.

  1. ASuch an investment is allowed without any disclosure, since it is within the same group
  2. BSuch an investment is banned in every circumstance under all fund structures
  3. CThe investment may be considered only with conflict-of-interest safeguards and proper disclosure to investors, in line with the regulations and the scheme's documentsCorrect
  4. DThe investment is allowed only after the scheme has been wound up

Explanation

Related-party dealings raise conflict-of-interest concerns. The framework expects them to be disclosed and managed through safeguards, and to be consistent with the scheme's documents, rather than being ignored. A blanket ban in all cases or total freedom are both overstated positions.

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