SEBI vide circular dated November 23, 2022 has issued clarification regarding Schemes of AIFs which have adopted priority in distribution among investors. It has been brought to SEBI’s attention that certain schemes of AIFs have adopted a distribution waterfall in such a way that one class of investors (other than sponsor/manager) share loss more than pro rata to their holding in the AIF vis-à-vis other classes of investors/unit holders, since the later has priority in distribution over former(‘priority distribution model’).
These schemes are being examined by SEBI in consultation with Alternative Investment Policy Advisory Committee, AIF industry associations and other stakeholders. Meanwhile, it is mandated that schemes of AIFs which have adopted aforesaid priority distribution model shall not accept any fresh commitment or make investment in a new investee company, till a view is taken by SEBI in this regard.
