Guidelines with respect to excusing or excluding an investor from an investment of AIF
Summary
This circular amends the Private Placement Memorandum guidelines for Alternative Investment Funds regarding investor excuse and exclusion. It permits AIFs to excuse investors who face legal violations or internal policy contraventions, subject to specific reporting requirements. Additionally, it allows managers to exclude investors if their participation harms the scheme or violates laws, requiring recorded rationale.
Text
an AIF may excuse its investor from participating in a particular investment in the following circumstances:
If the investor, based on the opinion of a legal professional/legal advisor, confirms that its participation in the investment opportunity would be in violation of an applicable law or regulation;
If the investor... had disclosed to the manager that, participation of the investor in such investment opportunity would be in contravention to the internal policy of the investor. Manager shall ensure that terms of such agreement with the investor include reporting of any change in the disclosed internal policy, to the AIF, within 15 days of such change.
Further, 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 investor in the investment opportunity would lead to the scheme of the AIF being in violation of applicable law or regulation or would result in material adverse effect on the scheme of the AIF. The manager shall record the rationale for such exclusion, along with the documents relied upon, if any.
If the investor of an AIF is also an AIF or any other investment vehicle, such investor may be partially excused or excluded from participation in an investment opportunity, to the extent of the contribution of the said fund/investment vehicle’s underlying investors who are to be excused or excluded from such investment opportunity. The manager of AIF shall record the rationale for such excuse or exclusion along with the supporting documents, if any.
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 — Guidelines with respect to excusing or excluding an investor from an investment of AIF. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.