(A) SEBI UPDATES
1) SEBI Circulars:
(a) Issuance of units of AIF in dematerialised form
All schemes of AIFs, other than a scheme whose initial tenure (without extension) ends on or before April 30, 2024, to dematerialize their units as per the below time frame:
Particulars | Schemes of AIFs with corpus ≥ INR 5 bn | Schemes of AIFs with corpus < INR 5 bn |
Investors with Demat Account | Units issued after Oct 31, 2023, shall be in demat form and credited only to investors demat accounts | Units issued after April 30, 2024, shall be in demat form and credited only to investors demat accounts |
Investors without Demat Account | Units credited to Aggregate Escrow Demat Account temporarily for investors on-boarded before Nov 01, 2023 | Units credited to Aggregate Escrow Demat Account temporarily for investors on-boarded before May 01, 2024 |
Completion of Demat Unit Credit | Latest by Jan 31, 2024 | Latest by May 10, 2024 |
- Terms of transfer of the de-materialized units of an AIF continue to be governed by the fund documents including the PPM.
- Manager is required to submit an E-report on compliance with the provisions on the SEBI Intermediary Portal in the specified format.
(b) The SEBI (Alternative Investment Funds) Regulations of 2012 have been amended and notified on January 5, 2024. The amendments require AIFs to hold their investments in dematerialised form and appointment of a custodian subject to certain conditions.
2) SEBI Reports:
(a) Consultation paper on extending tenure for Venture Capital Funds to deal with unliquidated investments:
- The proposal aims to enhance the flexibility of the dissolution period/process for venture capital funds (VCFs) in India through migration to the alternative investment fund (AIF) regime.
- The proposed principles of migration include creating a sub-category called ‘Migrated VCFs’ under Category I AIF, facilitating a smooth and cost-effective migration, and extending certain flexibilities and benefits available under VCF Regulations to Migrated VCFs.
(b) Consultation paper on a proposal to enhance trust in the Alternative Investment Funds (AIF) ecosystem to facilitate Ease of Doing Business measures:
- SEBI is actively engaging with industry participants, particularly through the pilot Standards Forum for AIFs (SFA), to formulate standards for the effective implementation of AIF
- The proposal introduces a general obligation in existing AIF regulations to prevent the misuse of AIF structures, mandating AIFs, managers, and key management personnel to ensure compliance with regulations set by financial sector regulators.
We affirmed that we are in full compliance with the proposed enhancements in the Alternative Investment Funds (AIF) regulations.
(B) RBI Updates:
Ever-greening of loans by Regulated Entities (REs):
- The Reserve Bank of India (RBI) has imposed restrictions on banks and non-banking financial companies (NBFC) investing in alternative investment funds (AIFs) to address concerns about the substitution of direct loan exposure with indirect exposure through AIF investments, preventing potential evergreening of loans.