The Securities and Exchange Board of India (SEBI) has issued a notification on Foreign investment in Alternative Investment Funds (AIFs). The notification was issued on 9th December, 2022.
According to Regulation 10(a) of SEBI (Alternative Investment Funds) Regulations, 2012 AIFs may raise funds from any investor. Such an investor may be Indian, foreign or non-resident Indians. These funds may be raised by way of issue of units.
The manager of an AIF shall ensure the following at the time of onboarding investors:
(a) Foreign investor of the AIF is a resident of the country whose securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding or a signatory to the bilateral Memorandum of Understanding with SEBI.
AIFs may accept a commitment from an investor being a Government or Government related investor, who does not meet the aforesaid condition. Provided that in such a case the investor must be a resident in the country as may be approved by the Government of India.
(b) The investor, or its underlying investors contributing twenty-five percent or more in the corpus of the investor or identified based on control, is not a person (s) mentioned in the Sanctions List notified from time to time by the United Nations Security Council and is not a resident in the country identified in the public statement of Financial Action Task Force as–
(i) a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which countermeasures apply; or
(ii) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.
In case an investor who has been on-boarded to the scheme of an AIF subsequently does not meet the conditions specified above, the manager of the AIF shall not draw down any further capital contribution from the such investor for investing until the investor again meets the said conditions. The same shall also apply to investors already on-boarded to existing AIF schemes of AIFs, who do not meet the requirements specified above.
This circular shall come into force with immediate effect.