SEBI Facilitates Seamless Transition To Dematerialized Units For Alternative Investment Funds[1]

Posted On - 24 December, 2023 • By - King Stubb & Kasiva

Mumbai, December 11, 2023 – The Securities and Exchange Board of India (SEBI) has issued a circular on the crediting of units of Alternative Investment Funds (AIFs) in dematerialized form, marking a significant step towards enhancing transparency and efficiency in the investment landscape.

Building on the guidelines outlined in SEBI Circular No. SEBI/HO/AFD/PoD1/CIR/2023/96 dated June 21, 2023, the recent circular addresses the dematerialization of units of AIFs within specified timelines.

For AIF schemes with a corpus equal to or greater than INR 500 crore, the circular mandates the crediting of units to existing investors (on-boarded prior to November 1, 2023) who haven’t provided their demat account details. This process must be completed at the earliest, but no later than January 31, 2024. Units already issued to investors with demat account details should be credited to their respective demat accounts by the same deadline.

For AIF schemes with a corpus below INR 500 crore, units issued to investors without demat account details must be credited to an Aggregate Escrow Demat Account by May 2024, with the deadline for the process being May 10, 2024. Units issued to investors with demat account details should also be credited to their respective demat accounts by this date.

SEBI has directed depositories to make necessary amendments to their bye-laws, rules, and regulations for the effective implementation of these provisions, including the facilitation of Aggregate Escrow Demat Accounts for AIFs. Additionally, depositories are mandated to communicate these provisions to their members and participants, disseminating the information on their websites.

This move aligns with SEBI’s continuous efforts to modernize and standardize market practices, fostering investor confidence and ensuring a seamless transition to dematerialized units for AIFs. Market participants are advised to stay informed about these changes to facilitate a smooth compliance process.