Executive Summary:
This circular, issued by SEBI on June 21, 2023, mandates the dematerialization of Alternative Investment Fund (AIF) units, following amendments to the AIF Regulations on June 15, 2023. The deadline for dematerialization varies based on the AIF's corpus size, with earlier deadlines for larger funds. The circular also outlines responsibilities for depositories and AIF managers regarding compliance and reporting.
Key Points / Main Content:
* **Dematerialization Mandate:**
* AIFs must issue units in dematerialized form, as per Regulation 10AA of AIF Regulations.
* Schemes with corpus >= Rs 500 Crore: Dematerialization by October 31, 2023; Dematerialized issuance from November 01, 2023.
* Schemes with corpus < Rs 500 Crore: Dematerialization by April 30, 2024; Dematerialized issuance from May 01, 2024.
* Exemption: Schemes ending on or before April 30, 2024, are exempt from dematerialization.
* **Transfer of Units:**
* Terms of unit transfer remain governed by the Private Placement Memorandum (PPM), agreements between the AIF and investors, and other fund documents.
* **Responsibilities of Depositories:**
* Amend Byelaws, Rules, and Regulations for implementation.
* Implement a system to ensure AIF manager approval for unit transfers, as per PPM or agreements.
* Inform members/participants and disseminate the circular on their websites.
* **Responsibilities of AIF Managers:**
* Submit a compliance report on the SEBI Intermediary Portal (www.siportal.sebi.gov.in) in the specified format.
* **Responsibilities of Trustees/Sponsors of AIFs:**
* Ensure compliance with this circular is included in the Compliance Test Report.
* **Effective Date:**
* The circular is effective immediately.
Impact Analysis:
* **Alternative Investment Funds (AIFs):**
* *Impact:* Must dematerialize units within the specified timelines, potentially incurring costs for system updates and compliance.
* *Action Required:* Implement necessary changes to dematerialize units, submit compliance reports, and ensure compliance is included in the Compliance Test Report.
* **Depositories:**
* *Impact:* Required to update their systems and regulations to facilitate dematerialization and unit transfers.
* *Action Required:* Amend relevant Byelaws, Rules and Regulations, put in place a system for transfer of units requiring AIF manager approval, and disseminate the circular to members and participants.
* **Investors:**
* *Impact:* Units will be held in dematerialized form. Terms of transfer remain as per existing agreements.
* *Action Required:* Be aware of the dematerialization requirements and any changes to unit transfer procedures.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): Regulatory body for securities market in India.
Alternative Investment Funds (AIFs): Investment funds that do not fall under traditional asset classes.
SEBI Alternative Investment Funds Regulations, 2012: Regulations governing Alternative Investment Funds in India.
Depositories: Organizations holding securities in dematerialized form.
Private Placement Memorandum (PPM): A legal document used in the offering of securities, detailing the terms, risks, and purpose of the investment.
SEBI Intermediary Portal: Online portal (www.siportal.sebi.gov.in) for submitting compliance reports to SEBI.
Securities and Exchange Board of India Act, 1992: Law establishing the Securities and Exchange Board of India and defining its powers.
SEBI Circular No. CIRIMDDF142014 dated June 19, 2014: SEBI circular related to compliance test reports by the manager of AIF
CIRCULAR
SEBI/HO/AFD/PoD1/CIR/2023/96 June 21, 2023
To,
All Alternative Investment Funds
All Depositories
Sir / Madam,
Sub: Issuance of units of AIFs in dematerialised form
1. SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), have
been amended and notified on June 15, 2023. Copy of the notification is available
at link.
2. In terms of Regulation 10(aa) of AIF Regulations, AIFs shall issue units in
dematerialised form subject to the conditions specified by SEBI from time to time.
3. In this regard, the following is specified:
3.1. All schemes of AIFs shall dematerialise their units in the following time frame:
Schemes of AIFs with Schemes of AIFs with
Particulars corpus ≥ Rs 500 corpus < Rs 500
Crore Crore
Dematerialisation of Latest by October 31, Latest by April 30, 2024
all the units issued 2023
Issuance of units only November 01, 2023 May 01, 2024 onwards
in dematerialised onwards
form
3.2. The requirement of dematerialisation of units of AIFs as specified at para 3.1
above, shall not be applicable for schemes whose tenure (excluding
permissible extensions in tenure) ends on or before April 30, 2024.
3.3. The terms of transfer of units of AIF held by an investor in dematerialised
form shall continue to be governed by the terms of private placement
memorandum (‘PPM’), agreements entered between the AIF and the
investors and any other fund documents.
Page 1 of 23.4. The Depositories are directed to:
3.4.1. make necessary amendments to the relevant Bye-laws, Rules and
Regulations for the implementation of the above provisions;
3.4.2. put in place a system to facilitate that any transfer of units of AIF held in
dematerialised form, which requires approval of the AIF/manager of AIF
in terms of PPM or agreements entered between the AIF and the
investors or any other fund documents, is carried out accordingly i.e. only
after approval of AIF/manager of the AIF;
3.4.3. bring the provisions of this circular to the notice of their members /
participants and also disseminate the same on their websites.
4. The manager of AIF shall submit report on compliance with the provisions of this
circular on SEBI Intermediary Portal (www.siportal.sebi.gov.in) in the format as
specified therein.
5. The trustee/sponsor of AIF, as the case may be, shall ensure that the ‘Compliance
Test Report’ prepared by the manager in terms of SEBI Circular No.
CIR/IMD/DF/14/2014 dated June 19, 2014, includes compliance with the
provisions of this circular.
6. The circular shall come into force with immediate effect.
7. This circular is issued with the approval of the competent authority.
8. 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.
9. 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
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