Sebi has decided to provide certain clarifications on the AIF regulations, increase transparency to the investors and provide reporting norms for AIFs.
Sebi has relaxed the reporting requirement for Category III AIFs with respect to their daily exposures.
In part modification of the circular dated July 29, 2013, all Category III AIFs shall report to the custodian the amount of leverage at the end of the day (based on closing prices) by the end of next working day. Category-III AIFs are those trading with a view to making short-term returns and it includes hedge funds. Currently, this category of AIFs is required to give the details to the custodian on the same day itself.
"It has been observed that with respect to reporting of amount of leverage at the end of the day, the AIF is dependent on various parties in order to calculate and submit to the custodian the amount of leverage as at the end of the day.
"Such various parties provide information at varied time periods due to which the AIFs are finding it difficult to report to the custodian the amount of end-of-day leverage on the same day," the latest circular said.
Sebi has asked all AIFs to disclose the "disciplinary history" of the fund, its sponsor, manager, directors, partners, promoters and associates and if the applicant is a trust, Trustees or trustee company and its directors. The details should be included in the AIF's placement memorandum.
These funds are required to provide details of pending and past cases (where the person has been found guilty) of litigations, criminal or civil prosecution, disputes and non-payment of statutory dues, among others.
"In case of operational actions such as administrative warnings/deficiency letters, the same may be grouped together and summarised. However, if the investor seeks details of the summarised portion, the same shall be provided by the AIF to the investor," the circular said.
Existing AIFs are required to send these details to their investors within 30 days. A copy of the same shall also be filed with SEBI at least 7 days prior to sending the same to the investors.
All AIFs shall intimate any change to the placement memorandum to all unit holders (including investors who have provided commitment to the AIF) within 7 days of making such change, specifically indicating the changes made. Such changes shall also be intimated to SEBI.
Existing unit holders who do not wish to continue post the change shall be provided an exit option. The unit holders shall be provided not less than one month for expressing their dissent.
In case the scheme of the AIF is open-ended, the exit option may be provided by either of the following:
(1) Buying out of units of the dissenting investors by the manager/ any other person as may be arranged by manager, valuation of which shall be based on market price of underlying assets.
(2) Redemption of units of the investors through sale of underlying assets.
In case the scheme of the AIF is close-ended, the exit option may be provided as under:
(1) The exit option shall be provided by buying out of units of the dissenting investors by the manager/ any other person as may be arranged by manager.
(2) Prior to buying out of such units, valuation of the units shall be undertaken by 2 independent valuers and the exit shall be at value not less than average of the two valuations.
Further, AIFs are required to intimate Sebi within two days of receiving request for redemption from the client.
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