Sebi calls for stricter review of AIF investors

Mumbai, Oct 9, 2024

Synopsis
At present, AIFs have been designated as qualified institutional buyers(QIB) and can avail certain benefits under Sebi rules. On Tuesday, Sebi said AIFs should not facilitate investors who are ineligible for QIB status on their own from availing the benefits.

The Securities and Exchange Board of India has asked alternative investment funds and their managers to exercise due diligence on their investors and investments, to prevent sidestepping of rules.

At present, AIFs have been designated as qualified institutional buyers(QIB) and can avail certain benefits under Sebi rules.

On Tuesday, Sebi said AIFs should not facilitate investors who are ineligible for QIB status on their own from availing the benefits.

"For every scheme of AIFs having an investor, or investors belonging to the same group, who contribute 50% or more to the corpus of the scheme, necessary due diligence... shall be carried out prior to availing benefits available to QIBs under ICDR Regulations and other SEBI Regulations," it said in a circular. Likewise, AIFs are also notified as qualified buyers and are eligible to subscribe to security receipts issued by an asset reconstruction company. Sebi said AIFs should also avoid facilitating the ever- greening of stressed loans or assets for RBI regulated entities and comply with RBI's norms on income recognition, asset classification, provisioning and restructuring of stressed loans.

[The Economic Times]