Tag Archives: alternative investment funds

amdt to AIF regulations

SEBI has vide its press release dated 28th December, 2021 announced amendment to the SEBI (Alternative Investment Fund) Regulations to bring about a new category of fund viz. Special Situations Fund as a sub category under Category I AIF. Details are as under:

  1. The Board approved amendment to AIF Regulations, to introduce Special Situation Funds, a sub-category under Category I AIF, which shall invest only in ‘stressed assets’ such as:
     Stressed loans available for acquisition in terms of Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021 or as part of a resolution plan approved under Insolvency and Bankruptcy Code, 2016
     Security receipts issued by Asset Reconstruction Companies
     Securities of companies in distress.
     Any other asset/security as may be prescribed by the Board from time to time
  2. Other important features of the regulatory framework for Special Situation Funds include:
     Exemptions from investment concentration norm in a single investee company
     No restriction on investing their investible funds in unlisted or listed securities of the investee company
     Minimum investment by an investor to be INR 10 crore and INR 5 crore in case of an accredited investor
     Minimum corpus of INR 100 crore
     Initial and continuous due diligence requirements mandated by RBI for ARCs’ investors shall also be applicable to SSFs while acquiring stressed loans in terms of Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021

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PMS for accredited investors

https://www.sebi.gov.in/legal/circulars/dec-2021/portfolio-management-services-for-accredited-investors_54828.html

SEBI has vide its circular dated 21st December, 2021 clarified that exit load applicable to the client of Portfolio Management Services shall, in the case of accredited investor, be governed through bilaterally negotiated contractual terms and the SEBI regulations will not apply in such cases.

What is “accredited investor”. It means, as per clause 2(1)(ab) of SEBI (Alternative Investment Funds) Regulations, 2012 any person who is granted accreditation by an accreditation agency and who

(i) in case he is individual, HUF, family trust, or sole proprietorship, has (a) annual income of at least Rs.20 million OR (b) net worth of at least Rs.75 million out of which not less than Rs.37.5 million is in the form of financial assets OR (C) has annual income of at least Rs. 10 million and minimum net worth of not less than Rs.50 million of which not less than Rs.25 million is in the form of financial assets

(ii) in case of body corporate, has net worth of at least Rs.500 million;

(iii) in case of trust other than family trust, has net worth of at least Rs.500 million;

(iv) in case of general partnership, then each partner independently meets the eligibility criteria for accreditation.

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alternative investment funds

SEBI has vide its circular dated 21st May, 2021 enhanced the overseas investment limits for SEBI registered alternative investment funds (AIFs)/ venture capital funds (VCFs) from USD 750 million to USD 1500 million. Details follow.

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alternative investment funds

SEBI circular dated 22nd October, 2020 outlining the procedure for registration of Alternative Investment Funds pursuant to the recent amendment in the applicable regulations regarding constitution of an Investment Committee to approve the investment decisions of the AIF.

Processing of applications for registrations of AIFs and launch of schemes
1 While processing applications for registration of AIFs and launch of new schemes, it has been observed that the Manager of AIF often proposes to set up an Investment Committee with the mandate to provide investment recommendations or advice to the Manager. In some applications, the Investment Committee is mandated to approve the investment decisions of the AIF. Such Investment Committees may consist of internal members (employees, directors or partners of the Manager) and/ or external members.
2 Pursuant to the approval of SEBI Board, the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) have been amended to provide that the Manager may constitute Investment Committee (by whatever name it may be called) to approve investment decisions of the AIF, subject to certain conditions. The amendment to AIF Regulations has been notified on October 19, 2020 and is available at link.
3 Further, SEBI has written to Government and RBI seeking clarity on the applicability of clause (4) of Schedule VIII under FEM (Non-debt Instruments) Rules, 2019 to investment made by an AIF whose Investment Committee approves investment decisions and consists of external members who are not ‘resident Indian citizens’.
4 Pending clarification as mentioned at Para 3, the applications for registration of AIFs and launch of new schemes shall be dealt with as under:

(i) The applications wherein Investment Committee proposed to be constituted to approve investment decisions of AIF includes external members who are ‘resident Indian citizens’, shall be duly processed.
(ii) The applications wherein Investment Committee proposed to be constituted to approve investment decisions of AIF includes external members who are not ‘resident Indian citizens’, shall be considered only after receipt of clarification as stated in Para 3 above
.

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alternative investment funds

SEBI has vide its notification dated 19th October, 2020 amended the SEBI (Alternative Investment Funds) Regulations, 2012 as follows:

Alternative Investment Fund (AIF) is a fund incorporated in India in form of a trust or company or LLP or body corporate which is basically a privately pooled investment vehicle which collects funds from investors, whether Indian or foreign for investing in accordance with its defined investment policy and objectives and which is not a mutual fund or a collective investment scheme.

Regulation 4(g) has been amended as follows. Regulation 4 pertains to eligibility criteria while granting certificate of registration to the AIF:

“(g) The key investment team of the Manager of Alternative Investment Fund has –
(i) adequate experience, with at least one key personnel having not
less than five years of experience in advising or managing pools of
capital or in fund or asset or wealth or portfolio management or in
the business of buying, selling and dealing of securities or other
financial assets; and
(ii) at least one key personnel with professional qualification in
finance, accountancy, business management, commerce,
economics, capital market or banking from a university or an
institution recognized by the Central Government or any State
Government or a foreign university, or a CFA charter from the
CFA institute or any other qualification as may be specified by the
Board:
Provided that the requirements of experience and professional
qualification as specified in regulation 4(g)(i) and 4(g)(ii) may also
be fulfilled by the same key personnel.”

What has been highlighted has been amended. Earlier it stipulated that the key personnel should have relevant professional qualification. Now what kind of professional qualification in which areas of expertise has been explicitly mentioned.

A new clause has been added in regulation 20 after sub-clause (5). Regulation 20 pertains to the general obligations, responsibilities and transparency of the AIF.

“(6) The Manager shall be responsible for investment decisions of the
Alternative Investment Fund:
Provided that the Manager may constitute an Investment Committee (by
whatever name it may be called), to approve investment decisions of the
Alternative Investment Fund, subject to the following:
(i) The members of Investment Committee shall be equally responsible as
the Manager for investment decisions of the Alternative Investment
Fund.
(ii) The Manager and members of the Investment Committee shall jointly
and severally ensure that the investments of the Alternative Investment
Fund are in compliance with the provisions of these regulations, the
terms of the placement memorandum, agreement made with the
investor, any other fund documents and any other applicable law.
(iii) External members whose names are not disclosed in the placement
memorandum or agreement made with the investor or any other fund
documents at the time of on-boarding investors, shall be appointed to
the Investment Committee only with the consent of at least seventy five
percent of the investors by value of their investment in the Alternative
Investment Fund or scheme.
(iv) Any other conditions as specified by the Board from time to time.”

Manager in an AIF has been defined as “any person or entity who is appointed by the Alternative Investment Fund to manage its investments by whatever name called and may also be same as the sponsor of the Fund;”

“Investment Committee” has not been defined anywhere in the regulations.

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