SEBI’s consultation paper to strengthen AIF Regulations

Author: thinkinglegal | January 29, 2020 - 10:05 | Tags: Regulatory Advisory

On 4 December 2019, SEBI issued a Consultation Paper on “Introduction of Performance Benchmarking and Standardization of Private Placement Memorandum (“PPM”) for Alternative Investment Funds (“AIFs”)” inviting comments on proposals to introduce the following:

  1. Introduction of minimum benchmarks for disclosure of performance
  • With the objective to enable prospective and current investors to compare individual AIFs’ performances with the performance of the industry or peer-group AIFs, SEBI has proposed to provide a framework to mandatorily benchmark the performance of AIFs and minimise the potential mis-sell of AIF products.
  • For this purpose, the following steps have been proposed by SEBI:
  • AIFs that have been registered with SEBI for at least three years shall report their audited scheme-wise performance data to single / multiple Benchmarking Agencies (to be identified).
  • Benchmark report of the AIF to be provided, if any data on the performance of the AIF is mentioned in any marketing/ promotion document.
  • A copy of benchmark report to be provided to all the investors.
  1. Standardisation of PPM
  • The Consultation Paper provides separate templates of PPM for Category I / II and Category III AIFs.

While the intention of introducing benchmarking for AIFs is laudable, it may increase compliance costs, especially for angel funds and other smaller funds.

This post has been contributed by Ms. Vaneesa Agrawal and Mr. Rishi Ahuja.

[DISCLAIMER:  This article is for academic purpose and is solely to provide readers with general information regarding developments in Indian law. The information contained herein does not constitute legal or a professional advice.]