Alternatives investment fund managers urged to swiftly comply with SEBI circular for demat credits

The Indian Venture and Alternate Capital Association (IVCA) and Private Equity Venture Capital Chief Financial Officer Association (PEVCCFOA) have advised all their members and Alternatives Investment Funds (AIFs) managers regarding compliance with the SEBI directive pertaining to demat credits.

Siddarth Pai, Co-Chair Regulatory Affairs Committee, IVCA and Secretary, Private Equity and Venture Capital CFO Association (PEVCCFOA) said, "SEBI has taken into account industry feedback and released a circular in December 2023 that gave the industry ample time to comply. This was an unprecedented exercise which involved SEBI, the Depositories and AIFs to co-create a framework which accommodates all. As we go down to the wire, it is important to remind all AIFs of the timelines and work together to make this novel initiative a success."

The SEBI circular addresses important timelines and procedures related to the crediting of funds to Demat and Aggregate Escrow Demat accounts. As per the circular the Credit of Units to the Demat Account of Investors or Aggregate Escrow Demat Account shall be completed by January 31 for schemes with a corpus of Rs 500 crore or above, and schemes with a corpus of less than Rs 500 crore must comply by May 10, 2024.

SEBI Board in its meeting held on March 29, 2023, approved the proposal to mandate issuance of units of AIFs in dematerialised form for ease of monitoring and administration by stakeholders and for protection against operational and fraud risk. 

IVCA said the circular underscores the importance of adhering to specific timelines and procedures, emphasizing the necessity for AIF managers to comply with the regulatory guidelines for the smooth operation of the system. AIFs that do not adhere to the circular's timelines will be in breach of regulatory requirements.  

Indian Venture and Alternate Capital Association (IVCA) is a not-for-profit, apex industry body promoting the alternate capital industry while Private Equity Venture Capital Chief Financial Officer Association is an organization that represents the interests of the finance professionals in Private Equity and Venture Capital Funds in India and that invest into India, which includes AIFs and Venture Capital Funds (VCFs).