Sebi Issues Disclosure Standards For Alternative Investment Funds

New Delhi, February 7: In an effort to streamline the disclosure standards, Securities and Exchange Board of India (Sebi) recently has proposed some disclosure standards when it comes to the Alternative Investment Funds (AIFs).  Sebi, in the month of December 2019, had sought public comments on ‘Introduction of Performance Benchmarking’ and ‘Standardisation of Private Placement Memorandum (PPM)’ for AIFs. Post the recommendation, from the public as well as from Alternative Investment Policy Advisory Committee (AIPAC). Sebi has introduced templates for PPM, subject to certain exemptions and introduced mandatory Performance Benchmarking for AIFs. 

“To ensure a minimum standard of disclosure is made available in the PPM, it has been decided to mandate a template for the PPM providing certain minimum level of information in a simple and comparable format,” read Sebi’s circular. That said, AIFs would also need to undergo an annual audit in order to ensure compliance with regards to PPM. The audit should be carried out by either internal or external auditor/legal professional. However, audit under the sections of PPM such as ‘Risk Factors’, ‘Legal, Regulatory and Tax considerations’ and ‘Track Record of First Time Managers’ would be optional. 

Sebi also proposed an industry benchmark to be developed to compare the performance of AIF Industry against other investment avenues such as global investment opportunities. “As the industry needs the flexibility to showcase its performance based on different criteria and benchmarking of performance of AIFs will help investors in assessing the performance of the AIF industry,” noted Sebi.  The benchmarking agencies and AIFs would also cover the mode and manner of data reporting, specific data that needs to be reported, keeping in the confidentiality aspect when the data is received by the benchmarking agencies.