Capital markets regulator Sebi on Friday came out with new guidelines for “Large Value Fund” for accredited investors, pertaining to filing of such schemes and extension of their tenures beyond two years.
“Large Value Fund (LVF)” for accredited investors means an AIF or scheme of an AIF in which each investor (other than the manager, sponsor, employees or directors of the AIF or employees or directors of the manager) is an accredited investor and invests at least Rs 70 crore.
While filing the placement memorandum for LVF schemes with Sebi, a duly signed and stamped undertaking by CEO of the manager to the AIF (or person holding equivalent role or position depending on the legal structure of manager) and compliance officer of manager to the AIF need to be submitted in a prescribed format.
In case of LVF schemes already filed with Sebi, similar duly signed and stamped undertaking by CEO of the manager to the AIF is required to be submitted to the regulator by July 31.
Under the AIF rules, LVFs are exempt from filing their placement memorandum with Sebi through merchant banker and incorporate comments of the regulator, if any, in their placement memorandum i.e LVFs can launch their scheme under intimation to the capital markets watchdog.
With regard to extension of tenure beyond two years, Sebi said that the placement memorandum, contribution agreement or other fund documents of LVF need to lay down terms and conditions for extension of the tenure beyond two years in order to enable the investors to take an informed decision.
LVF is required to obtain approval from its trustee/board of directors/designated partners for extending the tenure beyond two years, at least one month before expiration of the fund tenure or extended tenure.
In case requisite conditions are not fulfilled, LVF will have to liquidate and wind up in accordance with AIF rules.
The AIF rules permit LVF to extend its tenure beyond two years, subject to terms of the contribution agreement and other fund documents.
“All AIFs shall ensure that manager to AIF designates an employee or director as compliance officer who shall be a person other than CEO of the manager (or such equivalent role or position depending on the legal structure of manager). The compliance officer shall be responsible for monitoring compliance,” Sebi said.
Last year, the regulator had introduced the concept of ‘accredited investors’ in the Indian securities market in a bid to open up a new channel for raising funds.