Sebi releases guidance on AIF's foreign associates

The Securities and Exchange Board of India on Tuesday put on its website, a non-binding informal guidance on disclosures by foreign associates of alternative investment funds operating in India.

An alternative investment fund is a vehicle for rich investors and has a minimum investment size of Rs.1 crore. The fund is deployed in sophisticated schemes considered too risky for the average retail investor.

The regulator clarified that disclosures would be required of foreign related entities if they fall under the definition of associates. Such entities would be considered an associate if the sponsor of the fund or key officials like a director or partner hold more than 15 per cent stake in the entity. The fund would have to disclose a list of such associates to the regulator. The disclosure would also have to include the disciplinary history of such associates as well as its directors.

"An AIF shall disclose the disciplinary history of the directors...in its placement memorandum," said the Sebi note.

The informal guidance is a means for regulated entities to get Sebi's position on law. The guidance provided is not binding and merely reflects an opinion based on the specific circumstances of individual cases.

The response was in reference to a letter by Peninsula Brookfield Real Estate Fund, requesting clarity on the matter.