Credit of units of AIFs in dematerialised form
Summary
This circular mandates the dematerialization of Alternative Investment Fund (AIF) units and specifies the process for crediting units to investors' demat accounts. It introduces an 'Aggregate Escrow Demat Account' for holding units of investors who have not provided their demat account details by specific deadlines. The document outlines compliance timelines, reporting obligations, and implementation standards for AIF managers, depositories, and custodians.
Text
all schemes of Alternative Investment Funds (‘AIFs’) were mandated to dematerialise their units as per the following timeline: Schemes with corpus ≥ INR 500 Crore by October 31, 2023; Schemes with corpus < INR 500 Crore by April 30, 2024.
Managers of AIFs shall continue to reach out to existing investors to obtain their demat account details and credit the units issued to them to their respective demat accounts. Depositories shall also aid in this process as advised by SEBI.
Units already issued by schemes of AIFs to existing investors who have not provided their demat account details, shall be credited to a separate demat account named "Aggregate Escrow Demat Account”. This account shall be opened by AIFs for the sole purpose of holding demat units of AIFs on behalf of such investors.
As and when such investors provide their demat account details to the AIF, their units held in Aggregate Escrow Demat Account shall be transferred to the respective investors’ demat accounts within 5 working days. No transfer of units of AIFs from/within Aggregate Escrow Demat Account shall be allowed, other than for the aforesaid purpose.
Schemes of AIFs with corpus ≥ INR 500 Crore shall credit units already issued to existing investors (on-boarded prior to November 01, 2023) who have not provided their demat account details, into Aggregate Escrow Demat Account latest by January 31, 2024.
Schemes of AIFs with corpus < INR 500 Crore shall credit units issued to their investors who have not provided their demat account details by April 30, 2024, into Aggregate Escrow Demat Account latest by May 10, 2024.
For investors who have provided demat account details, units shall be credited only to investors demat accounts. For those who have not, units shall be credited in Aggregate Escrow Demat Account temporarily till investors provide their demat account details.
Units of AIFs held in Aggregate Escrow Demat Account can be redeemed and proceeds shall be distributed to respective investors’ bank accounts with full audit trail of the same.
Managers of AIFs shall maintain investor-wise KYC details of units held in Aggregate Escrow Demat Account, including name, PAN and bank account details, along with audit trail of the transactions. The same shall also be reported to Depositories and Custodians on a monthly basis.
Such standards shall be published on websites of Depositories and the industry associations which are part of the SFA... within 45 days of issuance of this circular.
Depositories are directed to – make necessary amendments to their relevant Bye-laws, Rules and Regulations for the implementation of the above provisions, including facilitation of Aggregate Escrow Demat Account for AIFs; and bring the provisions of this circular to the notice of their members / participants and also disseminate the same on their websites.
The circular shall come into force with immediate effect.
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Source: SecMarx — Credit of units of AIFs in dematerialised form. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.