Market regulator Sebi notifies pro-rata distribution norms for AIFs

The Securities and Exchange Board of India (Sebi) has notified the changes in regulations governing alternative investment funds (AIFs) mandating them to provide investors rights and distribution of proceeds in proportion (pro-rata) to their commitments in the scheme.

 

Pro-rata mandate is to ensure that benefits get distributed in ratio of the commitments made by an investor in the AIF scheme while pari-passu rights are to treat investors equally.

 

AIFs are niche investment vehicles for affluent investors with high entry barriers. These investments are drawn and deployed in tranches based on the investment opportunity, and thus the committed amount is not drawn in one-go.

 

“The rights of investors of a scheme of an Alternative Investment Fund, other than that specified in sub-regulation (21) of this regulation, shall be pari-passu in all aspects; provided that differential rights may be offered to select investors of a scheme of an Alternative Investment Fund, in the manner as may be specified by the Board, without affecting the interest of other investors of the scheme,” notes the Sebi notification dated November 18.

 

The norms are to address any superior treatment to a class of investors.

 

Sebi had approved the decision in its last board meeting held in September.