SEBI revises disclosure norms for alternative investment funds

SEBI revises disclosure norms for alternative investment funds

By PTI

  • 20 Jun 2014

To usher in more transparency, capital market regulator 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," the Securities and Exchange Board of India (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 person has 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 summarised. However, if the investor seeks details of the summarised 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, this category of AIFs are required to give the details to the custodian on the same day itself.

"It has been observed that with respect to reporting of amount of leverage at the end of the day, the AIF is dependent on various parties in order to calculate and submit to the custodian the amount of leverage at the end of the day.

"Such various parties provide information at varied time periods due to which the AIFs are finding it difficult to report to the custodian the amount of end-of-day leverage on the same day," the latest circular said.

Among others, AIFs are required to intimate Sebi within two days of receiving request for redemption from the client.