**Summary:**
This circular, reference number SEBI/HO/AFD/PoD1/CIR/2024/2, issued by the Securities and Exchange Board of India (SEBI) on January 11, 2024, addresses foreign investment in Alternative Investment Funds (AIFs). It modifies paragraph 4.1.2 under Chapter 4 of SEBI Master Circular No. SEBI/HO/AFD/PoD1/P/CIR/2023/130, dated July 31, 2023, concerning AIFs, in view of amendments to the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, gazetted on March 07, 2023, and September 04, 2023, which revised the thresholds for determining beneficial ownership.
The circular stipulates that AIF investors, or their beneficial owners, must not be on the United Nations Security Council's Sanctions List and must not be residents in countries identified by the Financial Action Task Force (FATF) as having strategic Anti-Money Laundering (AML) or Combating the Financing of Terrorism (CFT) deficiencies with countermeasures, or as jurisdictions that have not sufficiently addressed deficiencies or committed to an FATF action plan.
For existing AIF investors who no longer meet these revised conditions, AIF managers are instructed to cease drawing down further capital contributions for investment until the investor meets the specified criteria.
The provisions of this circular take effect immediately. The circular is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect investor interests and regulate the securities market. The full circular is available on the SEBI website (www.sebi.gov.in) under "Legal Framework > Circulars" and "Info for Alternative Investment Funds."
For further information, contact Sanjay Singh Bhati, Deputy General Manager, at +91 22 26449222 or ssbhati@sebi.gov.in.
Key Entities Referenced
Alternative Investment Funds: A type of investment fund that typically invests in less traditional assets, such as private equity, hedge funds, and real estate.
Government of India: The governing authority of the Republic of India.
Prevention of Money Laundering Maintenance of Records Rules, 2005: Indian legislation aimed at preventing money laundering and maintaining records related to financial transactions.
SEBI Master Circular No. SEBIHOAFDPoD1PCIR2023130: A circular issued by SEBI providing comprehensive guidelines and regulations for Alternative Investment Funds (AIFs).
Financial Action Task Force: An inter-governmental organization that develops policies to combat money laundering and terrorist financing.
United Nations Security Council: A principal organ of the United Nations responsible for the maintenance of international peace and security.
Securities and Exchange Board of India: The regulatory body for the securities market in India.
Securities and Exchange Board of India Act, 1992: The Act of the Indian Parliament that established the Securities and Exchange Board of India (SEBI).
CIRCULAR
SEBI/HO/AFD/PoD1/CIR/2024/2 January 11, 2024
To,
All Alternative Investment Funds
Sir / Madam,
Sub: Foreign investment in Alternative Investment Funds (AIFs)
1. The Government of India through gazette notification dated March 07, 2023 and September
04, 2023 has amended the Prevention of Money Laundering (Maintenance of Records)
Rules, 2005, inter-alia, to revise the thresholds for determining the beneficial ownership.
2. In view of the amendments to the Prevention of Money-Laundering (Maintenance of
Records) Rules, 2005, para 4.1.2. under Chapter 4 of SEBI Master Circular No.
SEBI/HO/AFD/PoD1/P/CIR/2023/130 dated July 31, 2023 for AIFs stands modified as
mentioned below:
The investor, or its beneficial owner as determined in terms of sub-rule (3) of rule 9 of
the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, is not the
person(s) mentioned in the Sanctions List notified from time to time by the United
Nations Security Council and is not a resident in the country identified in the public
statement of Financial Action Task Force as –
(i) a jurisdiction having a strategic Anti-Money Laundering or Combating the
Financing of Terrorism deficiencies to which counter measures apply; or
(ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies
or has not committed to an action plan developed with the Financial Action Task
Force to address the deficiencies.
3. In case an investor who has been already on-boarded to scheme of an AIF, does not meet
the revised condition as specified at para 2 above, the manager of the AIF shall not
drawdown any further capital contribution from such investor for making investment, until
the investor meets the said condition.
4. The provisions of this circular shall come into force with immediate effect.
5. This circular is issued with the approval of the competent authority.
Page 1 of 26. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities
and Exchange Board of India Act, 1992 to protect the interests of investors in securities and
to promote the development of, and to regulate the securities market.
7. The circular is available on SEBI website at www.sebi.gov.in under the categories “Legal
framework - Circulars” and “Info for - Alternative Investment Funds”.
Yours faithfully,
Sanjay Singh Bhati
Deputy General Manager
Tel no.: +91-22-26449222
ssbhati@sebi.gov.in
Page 2 of 2