Reporting Guidelines and Clarifications Under AIF Regulations
The Securities Exchange Board of India (“SEBI”) vide its circular dated June 19, 2014 has come up with additional guidelines/clarification on disclosure and reporting norms for registered Alternative Investment Funds (“AIFs”) under the SEBI (Alternative Investment Funds) Regulations, 2012 (“Regulations”). The modifications/addition made in the AIF Regulations are mentioned herein below:
1. Submission of information to SEBI under sub-regulation (1) of Regulation (3) of AIF Regulations
The SEBI vide this circular has relaxed the reporting timing for the amount of leverage to the end of next working day, instead of the same day.
2. Disclosures in Placement Memorandum (“PM”)
a. Disclosure on fees and charges and litigations
i. Now an Annexure in tabular form has to be made in the PM detailing the manner in which the charge and fees shall be applicable to the investors including the distribution water fall.
ii. In addition to this the PM should also include in detail the disciplinary actions about the outstanding/pending and past cases (where the person has been found guilty) of litigations, criminal or civil prosecution, disputed tax liabilities, etc. (Kindly refer the attachment for details and other actions which are required to be disclosed in the Placement Memorandum)
iii. The Annexure for fees and the details of disciplinary actions (if not already included) shall be send to all the investors as an addendum to the existing PM within 30 days of this circular
b. Changes to Placement Memorandum
i. If any changes for instance change of sponsor or change in fees etc. have been made in the PM, then the same should be highlighted in PM and in the covering letter at the time of final submission of PM, moreover the changes (if any) should be intimated to all the unit holders within 7 days of making the changes;
ii. Furthermore if there are any material changes in the PM and the investors dissent to it in that case the dissenting investor shall be given an exit opportunity in accordance with the procedure as prescribed in the guidelines.
3. Few key highlights about the clarifications made in the AIF Regulations
a. It is has been clarified that every AIF has to ensure that the corpus of an open-ended scheme is maintained to 20 crores. Conversely if by any chance any client requests for redemption the AIF should intimate the same to SEBI within 2 days and thereafter should take every necessary step to bring back the minimum corpus within 3 months. However if the AIF fails to achieve the minimum corpus then the entire units of all investors shall be redeemed.
b. Furthermore now only the following may be called as joint investors (not more than 2 persons) for the purpose of investment of not less than one crore rupees:
i. an investor and his/her spouse
ii. an investor and his/her parent
iii. an investor and his/her daughter/son
c. It has also been clarified that if any investment is made in real estate or infrastructure projects through Investee Company then it shall hold not less than one project.
d. Every Investor has to invest the minimum amount in the AIF as mentioned in the Regulations. However, if the Investor wish to partially redeem its units in that case the AIF has to ensure that the minimum limit of the fund is maintained.
e. If an in-principle approval is granted and the AIF fails to submit the registered trust deed or duly filed partnership deed thereof within the prescribed time period, then a fresh application has to be filled for the registration.
f. The term 'primarily' as mentioned in Regulation shall mean the main thrust of Category II AIFs ought to be. The investment portfolio of a Category II AIF ought to be more in unlisted securities as against the aggregate of other investments.
g. All circulars/guidelines as issued by SEBI with respect to KYC requirements, Anti-Money Laundering and Outsourcing of activities shall be applicable to AIFs and the manager of the AIF shall be responsible for compliance with such circulars/guidelines.
4. Compliance Test Report (“CTR”)
Every manager has to make a CTR by the end of financial year and shall submit the same to the trustee and sponsor within 30 days in the format as detailed in the Annexure to this circular. (Kindly refer the attachment for the Annexure). Moreover if any observations/ comments are made on the CTR the same shall be revised within 15 days.
Any violation of Regulations or circulars issued there under is observed by the trustee/sponsor, the same shall be intimated to SEBI as soon as possible.
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