SEBI clarifies on eligibility criteria for key investment team of the AIF managers; enhances obligation for managers of AIFs

The Securities and Exchange Board of India (SEBI) has, in a gazette notification dated October 19, 2020, issued the SEBI (Alternative Investment Funds) (Amendment) Regulations, 2020 (Amendment Regulations) to further amend the SEBI (Alternative Investment Funds) Regulations, 2012 (Principal Regulations).

The Amendment Regulation is effective since October 19, 2020.

Earlier Position Amended Position Implication
Regulation 4:

Eligibility Criteria.

For the purpose of the grant of certificate to an applicant, the Board shall consider the

following conditions for eligibility, namely, —

……………

(g) the key investment team of the Manager of Alternative Investment Fund has adequate experience, with at least one key personnel having not less than five years’ 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 and has relevant professional qualification;

………

 

 

 

 

Regulation 4:

Eligibility Criteria.

For the purpose of the grant of certificate to an applicant, the Board shall consider the

following conditions for eligibility, namely, —

……………

(g) the key investment team of the Manager of Alternative Investment Fund has adequate experience, with at least one key personnel having not less than five years’ 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 and has relevant professional qualification;

(g) The key investment team of the Manager of Alternative Investment Fund has –

(i) adequate experience, with at least one key personnel having not less than 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; and

(ii) at least one key personnel with 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:

Provided that the requirements of experience and professional qualification as specified in regulation 4(g)(i) and 4(g)(ii) may also be fulfilled by the same key personnel.

………

The eligibility criteria with regard to the key investment team is further detailed out. While the years and areas of experience required were already provided previously, the present Amendment Regulations bring in more clarity on the professional qualification criteria.

 

Now, at least one key personnel in the key investment team of the manager must have 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 SEBI).

It is also clarified that the requirements of experience and professional qualification as specified may also be fulfilled by the same key personnel.

 

Regulation 20:

General Obligations

………….

(5) The books of accounts of the Alternative Investment Fund shall be audited annually by a qualified auditor

Regulation 20:

General Obligations

………….

(5) The books of accounts of the Alternative Investment Fund shall be audited annually by a qualified auditor

(6) The Manager shall be responsible for investment decisions of the Alternative Investment Fund:

Provided that the Manager may constitute an Investment Committee (by whatever name it may be called), to approve investment decisions of the Alternative Investment Fund, subject to the following:

(i) The members of Investment Committee shall be equally responsible as the Manager for investment decisions of the Alternative Investment Fund.

(ii) The Manager and members of the Investment Committee shall jointly and severally ensure that the investments of the Alternative Investment Fund are in compliance with the provisions of these regulations, the terms of the placement memorandum, agreement made with the investor, any other fund documents and any other applicable law.

(iii)External members whose names are not disclosed in the placement memorandum 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 seventy five percent of the investors by value of their investment in the Alternative Investment Fund or scheme.

(iv) Any other conditions as specified by the Board from time to time.

In addition to the existing obligations and responsibilities of managers of AIFs, the Amendment Regulation has added a further obligation which requires them to take responsibility for investment decisions of the Alternative Investment Fund. Provision is also made for allowing constitution of an Investment Committee to approve investment decisions of the Alternative Investment Fund and the details with regard to the members and functioning of such committee is also specified.

 

 

 

Source: Securities and Exchange Board of India

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