Sebi Dematerializes AIF Investments: New Rules

New Delhi, Nov 25 (PTI) To facilitate ease of compliance and strengthen investor protection in Alternative Investment Funds (AIFs), Sebi on Saturday said all the fresh investments made by an AIF after September 2024 should be held in demat form.

Approving amendment to AIF rules, Sebi said that some exceptions have been provided.

Additionally, Sebi said that the mandate for the appointment of custodians should be extended to all AIFs.

Currently, the requirement applies to schemes of Category III AIFs and schemes of Category I and II AIFs with a corpus of more than Rs 500 crore.

"AIFs may appoint a custodian who is an associate of manager or sponsor of the AIF, subject to conditions similar to those prescribed under Sebi (Mutual Funds) Regulations, 1996 for permitting related party of sponsor of a mutual fund to act as its custodian, "the regulator said in a statement after the board meeting.

The board of Sebi also noted that the cost of compliance to the schemes coming under this mandate was an average of approximately Rs 88,000 per annum for availing custodial services, based on analysis of sample data.

Further, Sebi said, "Any fresh investment made by an AIF, beyond September 2024, shall be held in the dematerialized form".

The existing investments made by AIFs have been exempted from the said requirement, except in cases where an investee company has been mandated to facilitate demat of its securities; and investments where the AIF has been mandated to hold their investment in demat form.

The new requirement would be exempted for investments held by liquidation schemes of AIFs, schemes, whose tenure ends within one year, and schemes of an AIF that are in extended tenure.