SEBI Questions Venture Capitalists, Private Equity Managers On Details of Dispute Resolution Process

Market regulator Securities and Exchange Board of India (SEBI) has asked venture capital (VC) and private equity (PE) managers to give details of their mechanisms for dispute resolution. According to a report in The Economic Times, SEBI has also asked several funds to confirm whether they have spelt out the resolution framework in the private placement memorandum (PPM).

PPM is one of the key documents containing information on the investment strategy and risk management tools among other things. Usually, investors are known to check this document before putting money in an alternative investment fund (AIF). 

With the regulatory authority seeking this information, these funds need to submit it by October 13, 2022, as per the report.

An official with a trustee company also added to the report: “The nature of complaints fund managers and administrators receive from investors relate to less than expected returns, non-receipt of statements, non-disclosure of certain information, timing of exits, poor listing of start-ups IPOs, and the rationale of some of the investments… Probably, SEBI has seen a rise in investor complaints.”

Additionally, SEBI has asked all funds to share the number of complaints received by them in the previous two financial years. Along with this, they are also expected to submit various details, including the number of complaints that have been submitted to the resolution mechanism, type of resolution mechanism and whether resolution procedure was a part of PPM. 

Over the last few months, SEBI has reportedly been collecting a lot of information on AIFs. A while ago, the regulator had asked AIFs to disclose their valuation methods as most funds are close-ended vehicles that are invested in unlisted stocks.