Sebi comes out with modalities for migration of AIFs into AI-only scheme

Markets regulator Sebi on Monday issued modalities for migration of existing Alternative Investment Fund (AIF) schemes into accredited investor only (AI-only schemes) or Large Value Funds (LVFs).

This migration is subject to obtaining positive consent from all the investors and meeting the respective conditions, Sebi said in its circular.

This came after Sebi, in November, amended rules and facilitated the introduction of a separate category of AIF schemes, limited exclusively to Accredited Investors only (AI-only schemes), and offered the scheme-specific regulatory flexibilities in terms of less compliance around investor protection and extended additional relaxations and operational flexibilities to Large Value Funds for accredited investors.

In its circular, Sebi said that any new scheme proposed to be launched as an AI-only scheme or LVF will have the words 'AI only fund' or 'LVF' added to the scheme name at the end, respectively.

Such conversion and change in the name of the scheme is reported to Sebi by emailing to aifreporting@sebi.gov.in within 15 days, and such a change in the name is reported to depositories for carrying out necessary changes in their system within 15 days.

In respect of the AI status of investors, if investors are an AI at the time of onboarding into an AIF scheme, they will be reckoned as an AI through the life of the scheme, even if they were to lose such status in the interim.

Sebi noted that the maximum extension permissible for AI-only schemes will be five years, inclusive of tenure extended, prior to conversion to an AI-only scheme or an LVF scheme.

Further, it has been decided to exempt LVFs from following the standard template of placement memorandum and annual audit of the terms of placement memorandum, without the requirement of specific waivers from investors.