Brief Overview:
The Securities and Exchange Board of India (“SEBI”) has issued the following consultation papers thereby proposing changes to the regime for the alternative investment funds (“AIFs”):
1) Consultation Paper for investor consent for buying/selling investments from/to associates of AIFs. Comments are invited till 18th February 2023.
2) Consultation Paper for review of Eligibility Criteria for the Key Investment Team and prescribing qualification for compliance officer of Manager of an AIFs. Comments are invited till 18th February 2023.
3) Consultation Paper for dematerialization of units of an AIFs. Comments are invited till 18th February 2023.
4) Consultation Paper for direct Plan for schemes of AIFs and trail model for distribution commission in AIFs. Comments are invited till 18th February 2023.
5) Consultation Paper for AIFs to carry forward unliquidated investments to new scheme. Comments are invited till 18th February 2023.
Technical Details:
The key proposals pursuant to AIFs are:
1) SEBI seeks views with an aim to mandate the requirement of investor consent for AIFs dealing with their associates whilst buying or selling investments. It is proposed that an AIF shall not buy or sell investments, except with the approval of 75% of investors by value of their investment in the AIF, from or to
(a) associates; or
(b) schemes of AIFs managed or sponsored by its Manager, Sponsor or their associates.
2) It is proposed to amend the eligibility criteria for a Key Investment Team of an AIF and to replace the existing experience criteria prescribed under the SEBI (Alternative Investment Fund) Regulations, 2012, with a requirement of obtaining a relevant certification from an institution notified by SEBI by the compliance officer of the manager of an AIF and key investment member(s) of the manager of the AIFs.
3) It is proposed to make dematerialisation of units of an AIF compulsory. As a part of the first phase by 1st April 2024, all schemes of AIFs that have a corpus of more than INR 500 Crores shall compulsorily dematerialise their units.
4) SEBI provides two proposals in relation to
(a) direct plans for schemes of AIFs, entailing no distribution/placement fee; and
(b) Introduction of trail model for distribution commission in AIFs.
5) SEBI with the objective of ensuring proper recognition and disclosure of true asset quality, liquidity and fund performance by AIFs, has proposed transfer of unliquidated investments of such scheme into a new scheme subject to the consent of 75% of investors by value. In case the consent of 75% of investors by value is not obtained, the AIF shall mandatorily liquidate the investments at liquidation value within one year of expiry of the scheme.
For further details, please see:
Consultation Paper for investor consent for buying/selling investments from/to associates of AIFs
Consultation Paper for dematerialisation of units of an AIFs;
Consultation Paper for AIFs to carry forward unliquidated investments to new scheme
For any queries / clarifications, please feel free to ping us and we will be happy to chat:
Ms. Apurva Kanvinde (apurva.kanvinde@jclex.com)
Mr. Smit Parekh (smit.parekh@jclex.com)
Mr. Mannan Gala (mannan.gala@jclex.com)
