Alternative funding funds (AIF), together with enterprise capital (VC) and personal fairness (PE) companies, should “segregate and ring-fence” liabilities and belongings of every scheme from others, mandated the Securities and Change Board of India (SEBI).
“The supervisor and both the trustee or the trustee firm or the board of administrators or designated companions of the AIF, because the case could also be, shall be sure that the belongings and liabilities of every scheme of an AIF are segregated and ring-fenced from different schemes of the AIF; and financial institution accounts and securities accounts of every scheme are segregated and ring-fenced,” mentioned a SEBI gazette issued on 15 November.
This ring-fencing is anticipated to stop AIFs from utilising the sources of a plan to repay money owed and offset losses in associated schemes. Beneath the current rule, AIFs should file a brand new utility for the launch of a scheme in the event that they fail to reveal the preliminary closure of the scheme in the best way required. This manner, buyers in a single AIF scheme is not going to be negatively affected if one other scheme run by the identical AIF goes beneath or has vital losses.
Presently, Indian AIFs are allowed to launch a number of schemes. There was ambiguity on the norms concerning the ring-fencing and separation of every scheme, elevating questions on whether or not the belongings of 1 scheme may be utilised to fulfill the legal responsibility of one other scheme.
SEBI had earlier issued the same order in December 2020, after Franklin Temple-ton wound up six mutual fund schemes with out acquiring investor consent. “All belongings and liabilities of every scheme shall be segregated and ring-fenced from different schemes of the [mutual fund],” Sebi ordered at the moment.