Sebi proposes direct reporting of AIFs' PPM to streamline compliance

In a bid to streamline compliance costs and enhance operational efficiency for alternative investment funds (AIFs), the Securities and Exchange Board of India (Sebi) has put forth a proposal to allow certain changes in the private placement memorandum (PPM) of AIFs to be submitted directly to the regulator.

According to the draft circular released by Sebi, certain amendments in the PPM, such as adjustments in the fund size, details regarding affiliates, commitment period, and key personnel, among others, will no longer necessitate filing through a merchant banker. This move aims to rationalize compliance expenses and simplify regulatory procedures for AIFs.

The proposed changes also include modifications in contact information of AIF entities, risk factors, and track records of investment managers, among other details, which can now be directly reported to Sebi without involving a merchant banker.

Currently, any alterations in the terms of PPM require submission through a merchant banker, accompanied by a due diligence certificate in a prescribed format. These changes must be intimated to investors and Sebi on an annual basis, within one month of the financial year-end.

Sebi's draft circular also suggests exempting large-value funds for accredited investors (LVFs) from the mandatory requirement of informing changes in PPM terms through a merchant banker. Instead, LVFs would be permitted to directly report such changes to Sebi, provided they submit a duly signed undertaking by the CEO and compliance officer of the AIF manager.

The PPM serves as a crucial document outlining investment terms, risks, and potential returns for prospective investors, aiding them in making informed investment decisions.

Sebi has invited public feedback on the proposal until April 26, indicating its commitment to fostering a conducive regulatory environment that promotes efficiency and transparency in the AIF sector.

(With PTI inputs)