Securities and Exchange Board of India

Circular No. SEBI/HO/AFD/RAC/CIR/2022/088 | Dated: June 24, 2022

To,
All Alternative Investment Funds (AIFs)

Sir/ Madam,

Sub: Guidelines for Large Value Fund for Accredited Investors under SEBI (Alternative Investment Funds) Regulations, 2012 and Requirement of Compliance Officer for Managers of all AIFs

A. Guidelines for Large Value Fund for Accredited Investors

1. Pursuant to introduction of framework for “Accredited Investors” in the securities market, SEBI (Alternative Investment Funds) Regulations, 2012 (hereafter referred as ‘AIF Regulations’) have been amended to provide certain relaxations from regulatory requirements to ‘Large Value Fund for Accredited Investors’ (LVF).

Filing of LVF Schemes with SEBI

2. In terms of proviso to Regulation 12 of AIF Regulations, LVFs are exempt from filing their placement memorandum with SEBI through Merchant Banker and incorporate comments of SEBI, if any, in their placement memorandum i.e. LVFs can launch their scheme under intimation to SEBI.

3. While filing the placement memorandum for LVF schemes with SEBI, a duly signed and stamped undertaking by CEO of the Manager to the AIF (or person holding equivalent role or position depending on the legal structure of Manager) and Compliance Officer of Manager to the AIF shall be submitted in the format as mentioned at Annexure A.

4. In case of LVF schemes already filed with SEBI, similar duly signed and stamped undertaking by CEO of the Manager to the AIF (or person holding equivalent role or position depending on the legal structure of Manager) and Compliance Officer of Manager to the AIF shall be submitted to SEBI on or before July 31, 2022.

Extension of tenure beyond two years

5. Regulation 13(4) of AIF Regulations permits close ended AIFs to extend its tenure up to two years with the approval of two-third of its unit holders by value of their investment in the said AIF, while the proviso to Regulation 13 (4) of AIF Regulations permits LVF to extend its tenure beyond two years, subject to terms of the contribution agreement, other fund documents and such conditions as may be specified by the Board from time to time. In this regard, it is specified as under:

i. In order to enable the investors to take an informed decision, the placement memorandum, contribution agreement or other fund documents of LVF shall lay down terms and conditions for extension of the tenure beyond two years.

ii. LVF shall be required to obtain approval from its Trustee/Board of Directors/Designated Partners (depending upon the legal structure of the LVF) for extending the tenure beyond two years, at least one month before expiration of the fund tenure or extended tenure.

iii. In case requisite conditions specified in the placement memorandum, contribution agreement or other fund documents of LVF for extension of tenure beyond two years are not fulfilled, LVF shall liquidate and wind up in accordance with AIF Regulations and Circulars issued thereunder.

B. Requirement of Compliance Officer for Managers of all AIFs.

6. All AIFs shall ensure that Manager to AIF designates an employee or director as Compliance Officer who shall be a person other than CEO of the Manager (or such equivalent role or position depending on the legal structure of Manager). The compliance officer shall be responsible for monitoring compliance with the provisions of the SEBI Act, AIF Regulations and circulars issued thereunder.

7. 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 interest of investors in securities and to promote the development of, and to regulate the securities market.

8. This Circular is available on SEBI website at sebi.gov.in under the categories “Legal Framework – Circulars” and “Info for – Alternative Investment Funds”.

Yours faithfully,
Deepti Agrawal
General Manager
Tel no.: +91-22-26449616
Email: [email protected]

ANNEXURE – A

FORMAT FOR UNDERTAKING TO BE SUBMITTED BY CEO (OR EQUIVALENT ROLE OR POSITION DEPENDING ON THE LEGAL STRUCTURE) OF THE MANAGER TO AIF AND COMPLIANCE OFFICER OF MANAGER TO AIF

To,

Securities and Exchange Board of India

Dear Sir / Madam,

Sub: Filing of draft placement memorandum of (name of LVF scheme), scheme of (name of AIF/proposed AIF)

Based on the placement memorandum and supporting documents submitted by AIF/proposed AIF, we undertake that:

1. We have independently exercised due-diligence regarding information given in the placement memorandum, including the veracity and adequacy of disclosure made therein.

2. The AIF, its sponsor and manager are fit and proper persons based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008. None of the intermediaries named in the placement memorandum have been debarred from functioning by any regulatory authority.

3. All the material disclosures in respect of the fund raising, investment by the scheme and management thereof have been made in the placement memorandum and are based on latest available information.

4. We have satisfied ourselves that the proposed activities of the scheme are bonafide, fall within the objectives of the fund as specified in the Articles of Association or Trust Deed or Partnership Deed of the AIF and are to meet the stated investment objective.

Guidelines for Large Value Fund for Accredited Investors & Requirement of Compliance Officer for Managers of all AIFs

5. The disclosures made in the placement memorandum are true fair and necessary to enable the investors to make an informed decision with respect to the investment in the proposed scheme and such disclosures are in accordance with the requirements of SEBI (Alternative Investment Funds) Regulations, 2012, circulars, guidelines issued thereunder and other applicable legal requirements.

6. We have satisfied ourselves about the capability of the sponsor or manager to fulfil the requirement of maintaining continuing interest in the scheme as per SEBI (Alternative Investment Funds) Regulations, 2012.

7. We shall obtain copy of the Accreditation Certificate and an undertaking from the prospective investor to the effect that:

a) The prospective investor wishes to avail benefits under the AI framework.

b) The prospective investor has the ability to bear the financial risks associated with the investment.

c) The prospective investor has the necessary knowledge and means to understand the features of the Investment Product, including the risks associated with the investment.

d) The prospective investor is aware that the investment product is meant for AIs and would not be subject to the same regulatory oversight as over investment products meant for investors other than AI.

Place:

Date:

Signature: (to be signed by CEO (or equivalent role or position depending on the legal structure) of the Manager to AIF and Compliance Officer of Manager to AIF)

Enclosed:

1. Annexure I -Details of disclosures in the placement memorandum with respect to compliance with provisions of SEBI (Alternative Investment Funds) Regulations, 2012, applicable to the proposed LVF scheme.

2. Annexure II -Information with respect to disclosures in the placement memorandum.

ANNEXURE I

Details of disclosures in the placement memorandum with respect to compliance with provisions of SEBI (Alternative Investment Funds) Regulations, 2012, as applicable, to the proposed LVF Scheme

Note: This annexure may be modified in line with any amendments notified under SEBI (AIF) Regulations, 2012 from time to time.

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