On 19 October, 2020, the Securities and Exchange Board of India has notified an amendment to the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2016 ( AIFs Regulations).
By way of said amendment, it prescribes the conditions for the investment team as well as the investment committee formed by the investment managers of the alternative investment funds (AIFs).
The key features of this amendment are as follows:
- Eligibility criteria for the investment team of the investment manager
Regulation 4(g) of the AIFs Regulation, 2016 has been expanded whereby SEBI has allowed the following conditions to be fulfilled:
(a) The investment team of the investment manager should have adequate experience and professional qualification with at least one key personnel having relevant professional qualification and a minimum of five years of experience in advising or managing pools of capital or in fund or asset or wealth or portfolio management or in the business of buying, selling and dealing of securities or other financial assets.
(b) investment manager should also ensure that the investment team consist of at least one key personnel having a professional qualification in finance, accountancy, business management, commerce, economics, capital market or banking from a university or an institution recognized by the Central Government or any State Government or a foreign university, or a CFA Charter from the CFA Institute or any other qualification as may be specified by the Board.
- Conditions for the investment committee
By inserting sub clause (6) to Regulation 20, which talks about general obligations, the amendment has recognized the presence of the investment committee under the AIF Regulations for the first time. As per Regulation 20(6) of the AIF Regulation, the investment manager shall be responsible for investment decisions of the AIF. However, the investment management may constitute an investment committee, to approve the investment decisions of the AIF, subject to the following conditions:
(a) The committee members shall be equally responsible as the investment manager for the investment decisions of the AIF;
(b) The investment manager and the members of the investment committee shall jointly and severally ensure that the investments of the AIF are in compliance with the provisions of these regulations, the terms of the private placement memorandum (PPM), an agreement made with the investor, any other fund documents and any other applicable law; and
(c) External members whose names are not disclosed in the PPM or agreement made with the investor or any other fund documents at the time of onboarding investors shall be appointed to the investment committee only with the consent of at least 75% of the investors by the value of their investment in the AIF or scheme.
The notified amendment can be accessed by clicking here.
The detailed article written by Nexdigm Private Limited published on Mondaq can be accessed by clicking here.