Operational, Prudential and Reporting Norms for Alternative Investment Funds (AIFs)
Summary
This circular establishes operational, prudential, and reporting norms for Category III Alternative Investment Funds under SEBI regulations. It mandates specific risk management frameworks, compliance functions, and leverage limits not exceeding two times the Net Asset Value. Additionally, it prescribes detailed reporting schedules to SEBI and strict redemption suspension protocols for open-ended schemes. This section mandates Category III AIFs to monitor leverage and report breaches to custodians and clients within specific timeframes. It requires the immediate squaring off of excess exposure by the next working day while preserving SEBI's enforcement powers. Additionally, it restricts marketing document distribution to private placements and cites the statutory authority for the circular. This section provides Annexure II, which details the specific reporting format for Category III Alternative Investment Funds (AIFs) that undertake leverage. It mandates the disclosure of general fund information, cumulative financial flows, and detailed exposure metrics including derivatives and cash equivalents. Additionally, it requires reporting on leverage calculations, maximum single-compan
Text
All Category III AIFs which employ leverage shall have a comprehensive risk management framework supported by an independent risk management function, appropriate to the size, complexity and risk profile of the fund.
have a strong and independent compliance function appropriate to the size, complexity and risk profile of the fund supported by sound and controlled operations and infrastructure, adequate resources and checks and balances in operations.
maintain appropriate records of the trades/transactions performed and such information should be available to SEBI, whenever sought
provide full disclosure and transparency about conflicts of interest and how they manage them from time to time to investors in accordance with Regulation 21 of the AIF Regulations and any other guidelines as may be specified by SEBI from time to time.
Under Regulation 28 of the AIF Regulations, All AIFs shall submit periodical reports to SEBI relating to their activity as an Alternative Investment Fund.
Category I and II AIFs and the Category III AIFs which do not undertake leverage shall submit report to SEBI on a quarterly basis in the format as specified in Annexure I.
Category III AIFs which undertake leverage shall submit a report to SEBI on a monthly basis in the format as specified in Annexure II.
Reports shall be submitted by AIFs online through the online reporting system provided by SEBI... no physical reports shall be filed with SEBI.
Reports shall be submitted within 7 calendar days from the end of quarter/ end of month as the case maybe.
These norms shall apply to open ended Category III AIFs for all their existing and new schemes.
The Manager of such AIFs shall ensure adequate and sufficient degree of liquidity of the scheme/ fund in order to allow it, in general, to meet redemption obligations and other liabilities.
Suspension of redemptions by the Manager shall be justified only: 1. in exceptional circumstances provided that such suspension is exclusively in the best interest of investors of the AIF , or 2. if the suspension is required under the AIF regulations or required by SEBI.
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Source: SecMarx — Operational, Prudential and Reporting Norms for Alternative Investment Funds (AIFs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.