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SEBI brings major changes in AIFs

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This week SEBI has issued multiple circulars with respect to AIFs in order to bring further clarity and transparency in their operations. These circulars also indicate the importance being provided by SEBI to AIFs and the need to ensure their better governance. A quick snapshot of the circulars is provided below:

1. SEBI’s first circular provides for Standardised approach to valuation of investment portfolio of AIFs. The circular provides that valuation of securities, which are not prescribed under Mutual Fund Regulations, shall be carried out as per valuation guidelines endorsed by any AIF industry association, which in terms of membership represents at least 33% of the number of SEBI registered AIFs.

The circular further provides that any change in the methodology and approach for valuation of investments of scheme of AIF shall be construed as material change. Further, AIF’s shall appoint Independent Valuer to ensure independence in valuing investment portfolio of AIFs.

The circular also provides standards for reporting valuation of investments of AIF to performance benchmarking agencies.

2. SEBI’s second circular was with respect to issuance of units of AIFs in Dematerialised Form. The circular mandated that new and existings AIFs shall issue their units in dematerialized forms and the timeline provided for them is based on corpus and whether the schemes are existing or shall be launched subsequently.

3. SEBI’s third circular provides modalities for launching liquidation scheme and for distributing investments of AIFs in-specie. The circulars have been issued in the light of amendments to AIF Regulations earlier this month to provide flexibility to AIFs to deal with investments of their schemes which are not sold due to lack of liquidity during the winding up process. The amendment provided that AIFs may either sell such investments to a new Liquidation Scheme of the same AIF or distribute such unliquidated investments in-specie. This circular provides clarity on launch of liquidation scheme, requisite investor consents, valuation norms for residuary assets and the process of writing off of residuary investments as a last resort where requisite investor consent is not available.

The circulars are attached below for the reference of the readers.

Readers can also share their views on the issue with the Regstreet Law Advisors at info@regstreetlaw.com.

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