The Securities and Exchange Board of India (Sebi) has revised the norms for alternative investment funds (AIFs) raising capital from “Indian, foreign or non-resident Indians”.
According to the modified rules, the securities market regulator of the investor’s resident country must be a signatory to the International Organization of Securities Commission's (IOSCO) Multilateral Memorandum of Understanding or have a bilateral Memorandum of Understanding with Sebi. The regulator said the AIF manager must ensure them at the time of onboarding a foreign investor.
“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,” Sebi’s December 9 circular said.
Also, the investor contributing 25 per cent or more to the corpus should not be on the sanctions list notified by the United Nations Security Council and is not a resident in the country identified by the Financial Action Task Force (FATF), the international body for anti-money laundering and combating terror financing.
The regulator said, “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.”
Additionally, if the investor does not meet the specified conditions after onboarding to a scheme, the AIF manager will not take any further capital contribution until the investor meets the rules. It will also apply to those already onboarded to existing schemes of AIFs who do not meet the specified conditions.
Sebi said the new guidelines would come into force with immediate effect.
Sebi has recently passed several important orders for the safety and convenience of investors in the financial market. Earlier this month, it asked the Association of Mutual Funds in India (Amfi) to warn the asset management companies against fake Telegram groups cheating investors by masquerading as AMCs. In a letter, it directed the mutual fund companies to take prompt action against such entities.
The market regulator also made it mandatory for newly launched active debt instruments issued by a single issuer not to exceed 10 per cent of their net asset value (NAV) while investing in securities.
