Sebi Brings Framework For Foreign Investment In Alternative Investment Funds

Markets regulator Sebi on Friday came out with a framework for alternative investment funds (AIFs) raising capital from foreign investors.

At the time of on-boarding investors, the manager of an AIF would have to ensure that the foreign investor is a resident of a country whose securities market regulator is a signatory to the International Organization of Securities Commission’s (IOSCO) Multilateral Memorandum of Understanding or a signatory to a bilateral Memorandum of Understanding with Sebi.

“AIFs may accept commitment from an investor being Government or Government related investor, who does not meet the aforesaid condition, if the investor is a resident in the country as may be approved by the Government of India,” the Securities and Exchange Board of India (Sebi) said in a circular.

Further, the investor contributing 25 per cent or more in the corpus should not be a person mentioned in the Sanctions List notified by the United Nations Security Council and should not be a resident in a country identified in the public statement of the Financial Action Task Force (FATF).

The investor should also not be from a country that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with FATF to address such deficiencies.

In case an investor who has been on-boarded to a scheme of an AIF subsequently does not meet the specified conditions, the manager of the AIF will not drawdown any further capital contribution from such investor for making investment, until the investor again meets the conditions.

The same would also apply to investors already on-boarded to existing schemes of AIFs who do not meet specified conditions, Sebi said.

The new guidelines would come into force with immediate effect.

Under the rules, AIFs may raise funds from any investor, whether Indian, foreign or non-resident Indians, by way of issue of units.

AIFs are 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.