Disclosure Standards for Alternative Investment Funds (AIFs)
Summary
This circular mandates standardized Private Placement Memorandum (PPM) templates and annual compliance audits for Alternative Investment Funds. It introduces mandatory performance benchmarking against industry standards, requiring AIFs to report data to designated Benchmarking Agencies. Specific exemptions are granted to Angel Funds and large-ticket investors who waive PPM requirements.
Text
SEBI decided to introduce template(s) for PPM, subject to certain exemptions, and mandatory performance benchmarking for AIFs with provisions for additional customized performance reporting.
It has been decided to mandate a template for the PPM providing certain minimum level of information in a simple and comparable format. AIFs are also permitted to provide additional information in their PPM.
The template for PPM shall have two parts viz. Part A – section for minimum disclosures, and Part B – supplementary section to allow full flexibility to the Fund in order to provide any additional information, which it deems fit.
The template for PPM of AIFs raising funds under Category I and Category II is provided at Annexure 1. The template for PPM of AIFs raising funds under Category III is provided at Annexure 2.
It will be mandatory for AIFs to carry out an annual audit of such compliance. The audit shall be carried out by either internal or external auditor/legal professional. However, audit of sections of PPM relating to ‘Risk Factors’, ‘Legal, Regulatory and Tax Considerations’ and ‘Track Record of First Time Managers’ shall be optional.
The findings of the audit, along with corrective steps, if any, shall be communicated to the Trustee or Board or Designated Partners of the AIF, Board of the Manager and SEBI.
The terms of contribution or subscription agreement (by any name as it may be called), shall be aligned with the terms of the PPM and shall not go beyond the terms of the PPM.
The requirements as mentioned at para no. 2 and 5 above shall not apply to: (i) Angel Funds as defined in SEBI (Alternative Investment Funds), Regulations 2012. (ii) AIFs/Schemes in which each investor commits to a minimum capital contribution of INR 70 crores... and also provides a waiver...
The aforesaid requirements shall come into effect from March 01, 2020.
It is decided to introduce: a. Mandatory benchmarking of the performance of AIFs (including Venture Capital Funds) and the AIF industry. b. A framework for facilitating the use of data collected by Benchmarking Agencies to provide customized performance reports
Any association of AIFs (“Association”), which in terms of membership, represent at least 51% of the number of AIFs, may notify one or more Benchmarking Agencies, with whom each AIF shall enter into an agreement for carrying out the benchmarking process.
The agreement between the Benchmarking Agencies and AIFs shall cover the mode and manner of data reporting, specific data that needs to be reported, terms including confidentiality in the manner in which the data received by the Benchmarking Agencies may be used, etc.
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Source: SecMarx — Disclosure Standards for Alternative Investment Funds (AIFs). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.