60. (1) The norms regarding disclosures, valuation, computation of NAV, contribution by the FME in the scheme as applicable to a close ended restricted scheme under Chapter III of these regulations shall apply to a special situation fund. (2) A special situation fund shall be considered as a category under restricted schemes and accordingly a special situation fund shall additionally comply with such requirements as may be specified by the Authority for close ended restricted schemes from... ... ...

59. A special situation fund shall not borrow or engage in any leveraging activities other than to meet day-to-day operational requirements. =============... ... ...

58. (1) A special situation fund shall have the minimum corpus as may be specified by the Authority. (2) A special situation fund shall accept such eligible investors as may be specified by the Authority. (3) A special situation fund shall comply with such additional investment conditions as may be specified by the Authority. =============... ... ...

57. A special situation fund shall invest only in special situation assets. =============... ... ...

56. (1) A special situation fund shall only be a close-ended fund. (2) The tenure of a special situation fund, which shall not be less than three (3) years, shall be disclosed in the placement memorandum. (2) The tenure of a special situation fund may be extended up to two (2) years, subject to approval of two-thirds (2/3rd) of the investors by value of their investment in the scheme. (3) Further extension to the tenure of a special situation fund beyond the two (2) years period sha... ... ...

55. (1) A Registered FME may launch a special situation fund through a private placement memorandum by filing the memorandum with the Authority along with the applicable fees in the manner as specified by the Authority (2) The filing of scheme documents for restricted schemes shall be under a green channel whereby the schemes filed shall be open for subscription by investors immediately upon communication from the Authority to the FME that the placement memorandum has been taken on record... ... ...

Special situation assets include eligible stressed loans, security receipts issued by Reserve Bank-registered Asset Reconstruction Companies, and securities of companies connected with stressed loans, security receipts, insolvency proceedings, or continuing payment defaults. Default-related and insolvency-related securities require a "D" or equivalent downgrade. A special situation fund invests in these assets in accordance with its investment objectives and may act as a resolution applicant under the Insolvency and Bankruptcy Code, 2016.

PART D: SPECIAL SITUATION FUNDS 53. A Registered FME may launch a special situation fund in accordance with the provisions of this Chapter. =============... ... ...

An FME or its associate must contribute to a retail scheme at least one per cent of its assets under management or USD 200,000, whichever is lower. This obligation is excluded for relocated overseas funds or schemes and for fund of funds schemes investing in schemes with similar contribution requirements. The contribution must be made within forty-five days, maintained continuously, and may receive an extension. FME contributions may count towards applicable net-worth requirements.

Computation of NAV for retail schemes requires the Fund Management Entity to calculate net asset value daily for open-ended schemes and weekly for close-ended schemes, in the manner specified by the Authority. NAV calculation procedures and methodology must be fully documented, regularly verified, and amended as necessary.

Valuation of retail scheme assets requires the fund management entity and fiduciaries to comply with the investment valuation norms in the Sixth Schedule. Assets must be valued by an independent service provider, including specified registered intermediaries, a registered valuer, or another person specified by the Authority. This requirement does not apply to fund of funds schemes investing in regulated underlying schemes in IFSC, India or foreign jurisdictions where the underlying schemes are valued by an independent entity.

Borrowing by retail schemes is permitted only for temporary liquidity needs connected with redemption. The borrowing must not exceed twenty per cent of the scheme's assets under management and cannot remain outstanding for more than six months.

Retail-scheme offer documents must contain material investment information, including objectives, investor profile, scheme strategy, tenure, fees, risk-management practices, and relevant fund management entity details. Material changes to fund strategy require consent from at least two-thirds of investors by value. Net asset value must be disclosed daily for open-ended schemes and weekly for close-ended schemes. Portfolios must be disclosed quarterly within one month of quarter-end, while other material information must be communicated immediately.

Retail schemes are subject to limits on unlisted securities, single-company and sector exposure, associate investments, and scheme size. Open-ended schemes may invest up to 15% of AUM in unlisted securities, subject to an exception for eligible home-jurisdiction regulated investment funds. Single-company exposure is generally capped at 10%, extendable to 15% with fiduciary approval. Sector exposure is generally capped at 25%, and at 50% for financial services, subject to specified scheme exceptions. Retail schemes require a minimum size of USD 3 million, with transitional funding provisions for open-ended schemes.

Retail schemes may invest in listed, to-be-listed or traded securities, unlisted securities, money market and debt instruments, asset-backed or mortgage-backed securitised debt instruments, and disclosed units of other investment schemes. Derivatives, including commodity derivatives, are permitted only for hedging with suitable offer-document disclosure. Pending deployment of monies, the Fund Management Entity may use specified liquid investments. All investments must comply with regulatory requirements, the scheme's investment objective, and offer-document disclosures.

Retail schemes may be open-ended or close-ended. Close-ended schemes require a minimum three-year tenure disclosed in the offer document, and may be extended by up to two years with approval of investors holding two-thirds by investment value and approval of the Authority. Retail schemes must be established in an International Financial Services Centre as a company or trust under applicable Indian law and may pursue social venture, infrastructure, ESG, sectoral, thematic, asset-class, combined, retirement, or children's education investment strategies, subject to specified conditions.

Retail schemes must maintain at least twenty investors, with no individual investor contributing more than twenty-five per cent of the scheme's investment. Both the minimum investor threshold and the investor-concentration limit must be met within six months from closure of the offer under the International Financial Services Centres Authority (Fund Management) Regulations, 2025.

Retail scheme launches require the FME to file a draft offer document with applicable fees at least twenty-one working days before launch. The offer document remains valid for twelve months from communication that it has been taken on record, which is treated as a Certificate of Registration for Income-tax Act purposes. The FME must incorporate comments before launch, immediately disclose material changes, and obtain fiduciary approval before filing a retail scheme.

Retail Schemes may be launched by Registered FMEs (Retail) to pool money from all investors or a section of investors through an offer document. The pooled funds must be invested in permissible investments in accordance with the scheme's stated investment objective.

Restricted schemes may co-invest in permissible investments through a special purpose vehicle under the Authority's framework or through segregated portfolios issuing separate unit classes. Segregated-portfolio investments cannot be made on terms more favourable than those offered to the common portfolio, and their creation must be disclosed in the placement memorandum. A co-investment special purpose vehicle may undertake leverage if the placement memorandum discloses it.