**Summary:**
SEBI Circular SEBI/HO/IMD/DF6/CIR/P/2020/209, issued on October 22, 2020, addresses the processing of registration applications for Alternative Investment Funds (AIFs) and the launch of new schemes, specifically concerning the role and composition of Investment Committees. The circular clarifies that AIF Managers can establish Investment Committees to approve investment decisions, following amendments to the SEBI Alternative Investment Funds Regulations, 2012, which were notified on October 19, 2020.
The circular outlines the following stipulations:
* Applications proposing Investment Committees that include external members who are resident Indian citizens will be processed.
* Applications proposing Investment Committees that include external members who are non-resident Indian citizens will be considered after SEBI receives clarification from the Government and RBI regarding the applicability of clause 4 of Schedule VIII under FEM (Non-debt Instruments) Rules, 2019, to investments made by AIFs.
The circular is issued under the authority of Section 11(1) of the Securities and Exchange Board of India Act, 1992. The circular is available on SEBI's website 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 (AIFs): A type of investment fund that deals with sophisticated investors. The circular addresses all AIFs.
Investment Committee: A committee formed by the Manager of AIF to provide investment recommendations or approve investment decisions.
SEBI Board: The board of the Securities and Exchange Board of India (SEBI), which approved the amendments to the AIF Regulations.
SEBI Alternative Investment Funds Regulations, 2012: Regulations governing Alternative Investment Funds in India.
Foreign Exchange Management (Non-debt Instruments) Rules, 2019: Indian regulations concerning foreign investment in non-debt instruments, specifically Schedule VIII, clause 4, and its applicability to AIFs.
Reserve Bank of India (RBI): The central bank of India, from which SEBI sought clarity regarding the applicability of FEM (Non-debt Instruments) Rules, 2019.
Securities and Exchange Board of India Act, 1992: The Act that established the Securities and Exchange Board of India (SEBI) and defines its powers.
Sanjay Singh Bhati: Deputy General Manager at SEBI, who issued the circular.
CIRCULAR
SEBI/HO/IMD/DF6/CIR/P/2020/209 October 22, 2020
To,
All Alternative Investment Funds (AIFs)
Dear Sir/ Madam,
Sub: Processing of applications for registrations of AIFs and launch of schemes
1 While processing applications for registration of AIFs and launch of new schemes, it
has been observed that the Manager of AIF often proposes to set up an Investment
Committee with the mandate to provide investment recommendations or advice to
the Manager. In some applications, the Investment Committee is mandated to
approve the investment decisions of the AIF. Such Investment Committees may
consist of internal members (employees, directors or partners of the Manager) and/
or external members.
2 Pursuant to the approval of SEBI Board, the SEBI (Alternative Investment Funds)
Regulations, 2012 (“AIF Regulations”) have been amended to provide that the
Manager may constitute Investment Committee (by whatever name it may be called)
to approve investment decisions of the AIF, subject to certain conditions. The
amendment to AIF Regulations has been notified on October 19, 2020 and is
available at link.
3 Further, SEBI has written to Government and RBI seeking clarity on the applicability
of clause (4) of Schedule VIII under FEM (Non-debt Instruments) Rules, 2019 to
investment made by an AIF whose Investment Committee approves investment
decisions and consists of external members who are not ‘resident Indian citizens’.
4 Pending clarification as mentioned at Para 3, the applications for registration of AIFs
and launch of new schemes shall be dealt with as under:
Page 1 of 2(i) The applications wherein Investment Committee proposed to be constituted
to approve investment decisions of AIF includes external members who are
‘resident Indian citizens', shall be duly processed.
(ii) The applications wherein Investment Committee proposed to be constituted
to approve investment decisions of AIF includes external members who are
not ‘resident Indian citizens’, shall be considered only after receipt of
clarification as stated in Para 3 above.
5 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 market and to promote the development of, and to regulate the
securities market.
6 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
+91-22-26449222
ssbhati@sebi.gov.in
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