Sebi tweaks AIF rules; investors to get pro-rata rights

Stock market watchdog Sebi has tweaked Alternative Investment Funds (AIF) rules directing them to grant investors' rights in investment and distribution of proceeds in proportion to their commitments in a scheme. This means, the risks and profits of investments made under an AIF plan must be distributed proportionately to the contributions made by investors.

This is aimed at clarifying the regulatory intent of AIFs' being pooled investment vehicles and ensuring fair and equal treatment of investors of an AIF.

In a notification issued on November 18, the markets watchdog said, "The investors of a scheme of an AIF shall have rights, pro-rata to their commitment to the scheme, in each investment of the scheme and in the distribution of proceeds of such investment, except as may be specified by the Board (Sebi) from time to time." "The rights of investors of a scheme of an AlF, other than that specified in sub-regulation (21) of this regulation, shall be pari-passu in all aspects provided that differential rights may be offered to select investors of a scheme of an AIF in the manner as may be specified by the Board, without affecting the interest of other investors of the scheme".

Also, the Securities and Exchange Board of India (Sebi) said that differential rights can be offered to select investors of a scheme of an AIF without affecting the interest of other investors of the scheme.

The markets regulator has provided an exemption to Large Value Funds from ensuring pari-passu rights among its investors. This is subject to a waiver provided by each investor to this effect.
AIF is a privately pooled investment vehicle, which collects funds from investors, for investing under a defined investment policy for the benefit of its investors.

With PTI inputs