Until now, this obligatory Custodian appointment norm was relevant to Class III AIFs and to Class I and II AIFs with corpus greater than ₹500 crore. Now it stands prolonged to all AIFs.
The market regulator has efficient January 5 this 12 months amended its 2012 framed AIF Rules to additionally stipulate that AIFs can maintain securities of their investments solely in dematerialised type topic to sure exceptions.
The exclusions are investments by AIFs in devices which aren’t eligible for dematerialisation; investments held by a liquidation scheme of AIF that aren’t out there in dematerialised type.
SEBI has additionally now empowered itself to specify in future such different investments by AIFs or such different schemes of AIFs that needn’t be lined below dematerialisation requirement.
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The transfer to mandate AIFs to carry their investments in dematerialised type will improve transparency, cut back danger and supply consolation to traders, say specialists.
This will even encourage digitalisation of economic markets in India, to facilitate entry to the market and ease of doing enterprise, they mentioned. The dematerialisation requirement will align AIFs with nationwide precedence, it was felt.
NEW CONDITIONS
AIFs can now appoint a Custodian who’s an Affiliate of a Supervisor or a Sponsor of an alternate fund solely when sure situations are met.
In any respect factors of time, the Sponsor or Supervisor ought to have minimal web price of ₹ 20,000 crore. Additionally, fifty % or extra of the administrators of the Custodian don’t signify the curiosity of the Sponsor or Supervisor or their associates. The Custodian and the Sponsor or Supervisor of the AIF aren’t subsidiaries of one another and they don’t have widespread administrators.
SEBI additionally now desires the Custodians and the Supervisor of the AIF signal an enterprise that they might act independently of one another of their dealings of the schemes of the Fund.
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REGULATORY GAPS
The newest adjustments by SEBI in its AIF laws comes at a time when regulators (together with RBI) have moved quick to shut numerous regulatory gaps that led to breaches within the spirit of regulation and using such investments automobiles for escaping regulatory oversight.
Just lately, RBI in an obvious bid to deal with considerations of doable ever-greening by way of the AIF route tightened the norms for banks and NBFCs investing in such funding automobiles.
The central financial institution had, within the third week of December 2023, directed banks and NBFCs to not make investments in any AIFs that has downstream investments both immediately or not directly in a borrower of the financial institution.
- Additionally learn: RBI clamps down on evergreening of pressured loans through the AIF route
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