More Stories

Informist, Friday, Dec. 13, 2024

 

MUMBAI – The Securities and Exchange Board of India Friday rolled out guidelines on pro rata and pari passu rights of investors in alternative investment funds. In November, the market regulator had notified these changes and mandated that alternative investment funds provide investors rights and distribution proceeds in proportion to their commitments to a scheme. These guidelines of the final circular will be effective immediately.

 

Pro rata mandate means that the benefits must get distributed in ratio of the commitments made by an investor in an alternative investment fund scheme while pari passu rights are to treat investors equally.

 

In the new circular, the guidelines specify that maintaining these rights will not be applicable if the investor has been excused or excluded from participating in the investment or if the investor has defaulted on providing his or her pro-rata contribution for the said investment.

 

"Additionally, to provide flexibility in fund-raising from investors with varied risk appetite, the following entities may accept returns, lesser or share losses more than their pro-rata rights in investments of an AIF (alternative investment fund) or scheme of an AIF – Manager or sponsor of the AIF, Multilateral or Bilateral Development Financial Institutions, State Industrial Development Corporations, Entities established or owned or controlled by the central government or a state government or the government of a foreign country, including central banks and sovereign wealth funds," the circular said.

 

In the case of pari-passu rights, the regulator has specified that differential rights may be offered by the alternate investment funds to select investors without affecting the rights of other investors. The circular also said that the Standard Setting Forum for Alternative Investment Funds, or SFA, in consultation with the regulator, should make a list of specific differential rights which may be offered by the alternative investment funds. This list may be reviewed and updated by the SFA, in consultation with SEBI, whenever necessary.

 

The eligibility criteria and those investors who fit within the criteria to opt for a differential right must be disclosed in a private placement memorandum, the circular said.

 

The regulator also said that those large value fund for accredited investors, whose private placement memorandums have been filed with SEBI for launch of any scheme after Friday, can avail exemption from the requirement of maintaining pari-passu rights among investors if they have made appropriate disclosures.

 

The implementation standards formulated by SFA must be published on the websites of the industry associations which are part of the forum for alternative investment funds before Jan. 15, the circular said.  End

 

Reported by Kshipra Petkar

Edited by Ashish Shirke

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.