Sebi revises guidelines for alternative investment funds
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Mumbai: To usher in more transparency, the capital market regulator—Securities and Exchange Board of India (Sebi)—has revised certain guidelines for alternative investment funds, including stricter disclosure requirements.
Alternative investment funds (AIFs) are basically funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy.
It has been decided to “provide certain clarifications on the AIF regulations, increase transparency to the investors and provide reporting norms for AIFs”, Sebi said in a circular on Thursday.
Sebi has asked all AIFs to disclose the “disciplinary history” of the fund, its sponsor, manager, directors, partners, promoters and associates. The details should be included in the AIF’s placement memorandum.
These funds are required to provide details of pending and past cases (where the defendant had been found guilty) of litigations, criminal or civil prosecution, disputes and non-payment of statutory dues, among others.
“In case of operational actions such as administrative warnings/deficiency letters, the same may be grouped together and summarized. However, if the investor seeks details of the summarized portion, the same shall be provided by the AIF to the investor,” the circular said.
Existing AIFs are required to send these details to their investors within 30 days.
Meanwhile, Sebi has relaxed the reporting requirement for Category III AIFs with respect to their daily exposures.
Category III AIFs are those trading with a view to making short-term returns and it includes hedge funds.
Modifying a previous circular, issued in July 2013, Sebi said that all Category III AIFs shall report to the custodian the amount of leverage at the end of the day (based on closing prices) by the end of next working day.
Currently, Category III AIFs are required to give the details to the custodian on the same day.
The circular said that it had been observed that AIFs are dependent on various parties in order to calculate the amount of leverage and that since these parties would provide information at different times, it would be difficult for AIFs to report end-of-day leverage to the custodian on the same day.
AIFs are required to intimate Sebi within two days of receiving request for redemption from the client.