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The Securities and Exchange Board of India (SEBI) has proposed granting alternative investment funds (AIFs) greater flexibility in providing co-investment opportunities to investors under the AIF structure. Additionally, SEBI has suggested removing restrictions that currently prevent AIF investment managers from offering advisory services in listed securities. Under the proposed guidelines, co-investment could be facilitated through a Co-Investment Vehicle (CIV), a separate scheme within the AIF structure specifically designated for such purposes. SEBI has also suggested exempting the CIV scheme from specific AIF requirements, such as investment diversification norms, sponsor investment commitment, and minimum scheme tenure, with certain conditions. Public comments on the proposal have been invited until the end of this month.
The Securities and Exchange Board of India (SEBI) has proposed enhancing the flexibility of alternative investment funds (AIFs) to offer co-investment opportunities to investors through a more structured approach. The regulatory body suggested that AIFs could facilitate co-investment opportunities via a Co-Investment Vehicle (CIV) - a separate scheme specifically launched for making co-investments in unlisted securities. SEBI recommended that the CIV scheme should operate as a distinct scheme under AIF Category I or Category II, thereby allowing investors to co-invest in unlisted securities of investee companies where the AIF has already made or intends to make an investment. Advertisement
SEBI further indicated that investment managers of AIFs should be permitted to provide advisory services in listed securities, a move that could potentially open new avenues for AIF managers. Previously, such advisory services were restricted, thereby limiting the scope of AIF investment managers in the listed securities segment.
In its consultation paper, SEBI outlined that a shelf private placement memorandum (PPM) for the CIV scheme should be filed at the time of AIF registration if the AIF intends to provide co-investment facilities. Moreover, existing AIFs would also be allowed to file the shelf PPM for similar purposes. Each CIV scheme would be required to maintain a separate bank account, demat account, and PAN.
Additionally, SEBI proposed that co-investment through the CIV scheme should be accessible exclusively to accredited investors. The regulator also recommended exempting the CIV scheme from certain AIF regulatory norms, including investment diversification, manager/sponsor investment commitment, and minimum tenure requirements. However, the implementation of CIV schemes would be subject to standards set by a designated forum within the AIF industry to prevent potential misuse of the extended flexibility.
Public feedback on the proposed guidelines has been invited until the end of this month.
By permitting AIF managers to offer advisory services in listed securities, SEBI is potentially expanding the scope of AIF operations. The proposed exemptions for CIV schemes, such as investment diversification norms and minimum scheme tenure, could further incentivise investors seeking more targeted investment avenues. If implemented, these regulatory changes could potentially reshape the AIF landscape, offering investors enhanced opportunities while ensuring regulatory safeguards.
Source - PTI
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