SEBI Releases ‘Excuse and Exclusion’ Norms for AIF investors

Securities Exchange Board of India (SEBI) recently issued guidelines for excluding and excusing investors from investments done by an Alternate Investment Fund (AIF). This is being done to institute consistent and adequate disclosures for investors. Now, an AIF may excuse its investor from participating in a particular investment in the following circumstances–

1. Investor confirms that its participation in the investment opportunity would be in violation of applicable law or regulation, based on the opinion of a  legal professional/advisor.

2. Investor, as part of the contribution agreement or any other agreement signed with the AIF, had disclosed that participation in such investment opportunity would be in contravention to the internal policy of the investor.

3. An AIF may exclude an investor from participating in a particular investment opportunity if the manager of the AIF is satisfied that the participation of such an investor in the investment opportunity would lead to the scheme of the AIF being in violation of applicable law or regulation.

4. If the investor of an AIF is also an AIF or of any other investment vehicle such investor may be partially excused/excluded from participation in an investment opportunity to the extent of contribution of the said fund/investment vehicle’s underlying investors.

It needs to be noted here that the manager of the AIF shall record the rationale for such an excuse along with the supporting documents.