The Securities and Exchange Board of India (SEBI) has referred notices to several Another Investment Funds (AIFs) for alleged violation of quantified tenure rules on their investment busses.
The market ombudsman sent notices to private equity and scheme capital funds, registered with SEBI as AIFs, which were not intelligent to follow the timeline of fund tenures specified in their particular offer documents while garnering the corpus, ET described.
Many of the early reserves that floated around 2013-14, were scheduled to close processes by 2021-2022.
While a fund can range its lifespan by up to two years, two-thirds of investors in such a fund have to give their accord for tenure extension, according to rules. Once an AIF’s life cycle is comprehensive, the AIF manager is required to settle all the holdings and distribute the proceeds amongst the investors within a year.
While SEBI has not provided any exemptions yet, some of these reserves have extended the tenures. The market controller also observed that the fund managers concerned had unilaterally lengthy the tenure of the funds without updating.
“The rules say the winding up must be completed within one year, Sebi is well within its rights to initiate deed against them,” a source said as quoted in the story.
“However, this is like a two-fold whammy for the funds that expected SEBI to provide them some leeway. As a substitute, they have now received SEBI notices,” the cause added.
As per the report, SEBI is attractive in this move to ensure the protection of investor interests and transparency ethics in a wealth-management segment aimed at savvy besides deep-pocketed savers.
Because of the unfortunate liquidity conditions in the market, PE and VC reserves investing in unlisted companies, such using startups, were unable to liquidate their fortunes within the one-year timeline. However, some funds were able to find eager buyers but at knowingly lower valuations.
The market watchdog has now asked the respective fund managers to elucidate why they unilaterally extended freeholds of the funds.