Sebi bans fresh inflows into AIF schemes making 'priority distribution'

Schemes adopting such a model, which benefits one class of investors at the cost of others, have also been barred from investing in new companies

The Securities and Exchanges Board of India (Sebi) has asked Alternate Investment Funds (AIFs) to not accept any fresh investments in schemes that have adopted a priority distribution model, which benefits one class of investors at the cost of others.

The regulator has also prohibited such schemes from investing in a new company.

According to Sebi, certain schemes of AIFs have adopted a distribution waterfall that allows disproportional sharing of losses.

"It has been brought to Sebi’s attention that certain  schemes of AIFs  have adopted a distribution  waterfall in such a way, that one class of investors (other than sponsor/manager) share loss more