Private Funds - SEBI Introduces Investor Diligence Requirements For AIFs: Resolut Partner Analysis

The Legal Library section collates quality and in-depth reports on regulatory developments, court rulings and policy changes authored by India’s top law firms and consultants. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of law and policy..Resolut Partners Update.The Securities and Exchange Board of India has cast new investor diligence obligations on alternative investment fund managers, which extends to underlying investors. These include: The manager of an AIF is not permitted to on-board new investors or draw down capital from existing investors unless the diligence conditions have been complied with. The new rule appears to specifically target Financial Action Task Force ‘grey list’ jurisdictions and may impact fundraising from the UAE and the Cayman Islands.SEBI has not provided any grandfathering mechanism, which means that some AIFs may face immediate or near-term deal-completion issues.In the longer term, the new rule may lead to negotiations on various terms of fund economics and governance..There can be little quarrel with SEBI’s intent behind introducing these diligence conditions for on-boarding investors in AIFs (as well as for drawing down commitments from already on-boarded investors in existing AIFs). Similar diligence conditions were introduced for non-banking financial companies i.e. investors of existing NBFCs were permitted to continue with their investments or bring in additional investments to support continuity of business in India if their initial contribution was made prior to their jurisdiction being classified as an FATF non-compliant jurisdiction. The Reserve Bank of India was also mindful to only prohibit new investors of non-compliant jurisdictions from exercising ‘significant influence’ in the NBFC. So, it may have been more equitable if SEBI had provided for a similar grandfathering mechanism for existing AIFs (as they may now have some immediate issues with deal completion) and applied the diligence requirement only to the on-boarding of investors..Click on the attachment to read the full report:.DISCLAIMERThis alert does not constitute legal advice and is for information purpose only. This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Private Funds - SEBI Introduces Investor Diligence Requirements For AIFs: Resolut Partner Analysis

There can be little quarrel with SEBI’s intent behind introducing these diligence conditions for on-boarding investors in AIFs.

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