Schemes of AIFs which have adopted priority in distribution among investors
Summary
SEBI has issued a circular addressing Alternative Investment Funds that have adopted a priority distribution model among investors. The regulator mandates that such schemes must not accept fresh commitments or invest in new companies until a final view is taken on the matter. This directive is issued under Section 11(1) of the SEBI Act to protect investor interests.
Text
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 than pro rata to their holding in the AIF vis-à-vis other classes of investors/unit holders, since the later has priority in distribution over former ('priority distribution model').
schemes of AIFs which have adopted aforesaid priority distribution model, shall not accept any fresh commitment or make investment in a new investee company, till a view is taken by SEBI in this regard.
This circular shall come into force with immediate effect.
This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Schemes of AIFs which have adopted priority in distribution among investors. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.