SEBI Changes Rules of Alternative Investment Fund

Alternative Investment Fund
Karan Singh
| Updated: May 21, 2021 | Category: AIF

The SEBI (Securities and Exchange Board of India) has changed standards concerning the AIF or Alternative Investment Funds like vital relevant professional credentials. Under the new rules, qualification and experience criteria by the investment team may be pleased separately or collectively by employees of the crucial manager’s investment team.

The step comes into action after the SEBI approved such amendments in this regard. In this newest notification in October, the regulator said that the essential investment team, including the manager of AIF or Alternative Investment Fund is need to have enough experience, with at least one crucial personnel having at least five years of experience in managing pools of capital or advising or assets or wealth in the business of dealing of securities selling & buying. To understand more these changes or amendments better, we have first to discuss the meaning of the Alternative Investment Fund.

An Overview of Alternative Investment Fund

It’s a type of monetary asset The SEBI (Securities and Exchange Board of India) has changed standards concerning the AIF or Alternative Investment Funds like vital relevant professional credentials. Under the new rules, qualification and experience criteria by the investment team may be pleased separately or collectively by employees of the crucial manager’s investment team.

The step comes into action after the SEBI[1] approved such amendments in this regard. In this newest notification in October, the regulator said that the essential investment team, including the manager of AIF or Alternative Investment Fund is need to have enough experience, with at least one crucial personnel having at least five years of experience in managing pools of capital or advising or assets or wealth in the business of dealing of securities selling & buying. To understand more these changes or amendments better, we have first to discuss the meaning of the Alternative Investment Fund.

that doesn’t come under the categories of expected investment. Such categories consist of stocks, bonds, and cash. Most of the assets of alternative investment are held by the institutional investors or accredited, enormous net-worth individuals because of their compound nature, level of risk, and insufficiency of regulation.

An Alternative Investment includes derivatives contracts, venture capital or private equity, managed futures, arts & antiques, commodities, and hedge funds. Real estate is also frequently categorized as an alternative investment.

Different Types of Alternative Investment Funds

As per the SEBI, an Alternative Investment Fund can be divided into three categories:

  1. Category 1: Usually, this category in initial stage ventures, start-ups, SMEs, infrastructure, angel funds, and other sectors. This division is most cheap to run and have huge growth potential. For instance, Angle Fund, Venture Capital Fund, Social Venture Fund, etc.
  2. Category 2: There are funds that are especially invested in equity and debt securities. No concessions are offered by the Government to invest in these types of funds. For instance, the Debt Fund, Private Equity Fund, and Fund of Funds, etc.
  3. Category 3: This type of fund is to procure short-term returns. They use various methods such as derivatives strategies, margin trading, arbitrage derivatives, etc. to satisfy the aim of increasing short-term capital goals. For instance, PIPE (Private Investment in Public Equity Fund), Hedge Fund, etc.

Latest Amendments in Alternative Investment Fund Rules

Under this amendment by the SEBI, the experience & qualification of the investment team may be fulfilled separately or collectively by personnel of essential investment line-up of the manager. This step comes after the Board of Securities switched board-certified amendments in this concern.

In this notification, the regulator mentions that the primary investment team of the manager of alternative investment need to have enough experience, with at least one major personnel having a minimum of 5 years of experience in regulating pools of advising or assets or capital or wealth or in the business of dealing of securities selling & buying. Moreover, such primary investment teams require a minimum of one essential personnel with professional qualifications in accountancy, business management, commerce, economics, finance, banking from a well-known capital market and institution.

The SEBI further said that the manager will be responsible for investment decisions in the Alternative Investment, offered that such manager includes a committee of investment to consent to the investment decisions of the alternative investment. This is subject to the investment committee’s members being consistently liable as the manager for alternative investment decisions. The committee’s managers and members will together and individually ensure that the investments of the AIF are inconsistent with the provisions of such regulations.

Reason behind this Modification in the Alternative Investment Fund

The SEBI, via this modification, need managers to be liable for the investment declaration of all the ALFs, delivers that the manager will include a board of investment to accept such decisions of the investment. This is concerning the investment committee’s members being comparably accountable as the manager for investment decisions of the AIF.

The committee’s managers and members will jointly and individually make sure that the investments of the AIF are in consent with the provisions of such laws.

The SEBI also states external members whose names are not disclosed in the placement memorandum of the agreement made with the investor during non-boarding will be chosen to the committee of investments only with the consent of at least 70% of the investors by the worth of their investment in the AIF or Alternative Investment Fund.

Conclusion

The SEBI has changed standards concerning alternative investment, like vital relevant professional qualifications. By these changes, the investment team’s criteria of qualification and experience may be fulfilled separately or collectively by employees of the essential investment team of the manager. Further, these changes made by the manager held accountable for the investment announcement of all the AIF or Alternative Investment Fund, delivered that the manager will include of a board of investment to consent such decisions of investment.

Read our article:SEBI Changes Rules of Alternative Investment Fund

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Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

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