SEBI proposes direct reporting of AIFs' PPM changes to streamline compliance cost

To facilitate ease of doing business, Sebi has proposed that certain changes in the private placement memorandum of alternative investment funds can be submitted directly to the regulator rather than through a merchant banker. Also, the proposed move would rationalise the cost of compliance for alternative investment funds (AIFs). In its draft circular, Sebi said that certain changes carried out in private placement memorandum (PPM) are not required to be filed through merchant bankers and can be filed directly to the regulator.

These included changes in the size of the fund, information related to affiliates, commitment period, key investment team of the manager and key management personnel of AIF, and reduction in expense or fee or cost charged to fund/investors. Additionally, changes in contact details of AIF, sponsor, manager, trustee or custodian, risk factors and track records of investment manager, among others, are not required to be filed through a merchant banker.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposal by April 26. At present, any change in the terms of PPM is required to be submitted to Sebi through a merchant banker, along with a due diligence certificate from the merchant banker in a specified format. Such changes in the terms of PPM and in the documents of the fund/scheme are required to be intimated to investors and Sebi on a consolidated basis within one month of the end of each financial year.

In its circular, the regulator also recommended that large-value funds for accredited investors (LVFs) should be exempted from the requirement of intimating any changes in the terms of PPM through a merchant banker. Moreover, it suggested that LVFs should directly file any changes in the terms of PPM with Sebi, along with a duly signed and stamped undertaking by the CEO of the manager of the AIF and compliance officer of the manager of the AIF in a specified format. PPM is a document used to present details of an investment opportunity offered by a company or fund to potential investors. It outlines investment terms, risks, and potential returns to inform investors' decision-making.