Sebi mulls direct reporting of AIFs' PPM changes to rationalise compliance cost

Market regulator Securities Exchange Board of India (SEBI) is considering some major changes in the private placement memorandum (PPM) of alternative investment funds (AIFs).

In order to facilitate the ease of doing business, Sebi has proposed that the PPM of the AIF can be directly submitted to the market regulator rather than processing it through a merchant banker.

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The proposed move would also rationalise the cost of compliance for AIFs.

PPM is a document used to present details of an investment opportunity offered by a company or fund to potential investors.

In its draft circular, Sebi said that certain changes carried out in private placement memorandum are not required to be filed through merchant bankers and can be filed directly to the regulator. These included changes in the size of the fund, information related to affiliates, commitment period, key investment team of the manager and key management personnel of AIF, and reduction in expense or fee or cost charged to fund/investors.

The changes in contact details of AIF, sponsor, manager, trustee or custodian, risk factors and track records of investment manager, among others, are not required to be filed through a merchant banker, said the draft circular.

Currently, any change in the terms of PPM is required to be submitted to Sebi through a merchant banker, along with a due diligence certificate from the merchant banker in a specified format. 

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The market regulator has sought public comments on the proposal by April 26.

It has also proposed that large-value funds (LVFs) for accredited investors should be exempted from the requirement of intimating any changes in terms of PPM through a merchant banker.

Moreover, it suggested that LVFs should directly file any changes in the terms of PPM with Sebi, along with a duly signed and stamped undertaking by the CEO of the manager of the AIF and compliance officer of the manager of the AIF in a specified format.