Answer ... There are no specific authorisation requirements under the AIF Regulations in this regard. Under the AIF Regulations, AIFs can be marketed only though private placement by issuance of an information memorandum. However, units of an AIF can be listed on stock exchanges only after final close of the AIF or its scheme, and subject to a minimum tradeable lot of INR 10 million. At present, no AIFs have listed their units on Indian stock exchanges.
Answer ... There are no specific authorisation requirements for marketing of an AIF; however, the AIF Regulations are evolving and the Securities and Exchange Board of India (SEBI) is seeking industry feedback on regulating the fees of brokers and placement agents of AIFs, as well as imposing a standardised private placement memorandum format for new AIFs and schemes. AIFs that are seeking to raise funds from offshore investors must comply with the placement requirements of the home jurisdictions of such investors.
Answer ... Currently, AIF units are distributed by banks and wealth managers, which charge a fee to connect prospective investors with managers. Distribution services are not specifically or separately regulated.
Answer ... AIFs can be privately placed and marketed to a limited number of sophisticated and/or private investors, including funds of funds, government institutions, corporates, public sector undertakings, private banks, insurance companies, eligible pension funds, global development financial institutions, multilateral organisations and high-net-worth individuals. Indian entities such as banks, insurance companies and pension funds are subject to the restrictions prescribed by their sectoral regulators with respect to investment in AIF units; hence their investments must comply with these regulations over and above compliance with the AIF Regulations.
Answer ... The marketing materials for AIFs must satisfy the requirements as specified in the AIF Regulations. The private placement memorandum must contain all material information about the AIF and the AIF manager, including:
- the minimum commitment size;
- the background of the key investment team of the AIF manager;
- the target investors of the AIF;
- the fees and other expenses proposed to be charged by the AIF;
- the target size of the AIF;
- the tenure of the AIF (or of the specific scheme);
- conditions and limitations with respect to the redemption of AIF units;
- the investment objective and strategy;
- risk management tools and the parameters employed;
- key service providers;
- conflict of interest and procedures to identify and address the same;
- disciplinary history;
- the terms and conditions of the AIF manager;
- how the AIF or scheme will be wound up; and
- any other such information as may be required for the investor to make an informed decision on whether to invest in the AIF.
Answer ... Operating an AIF is a regulated activity in India and an AIF must be registered with SEBI prior to commencing activities. Further, the AIF Regulations prescribe that the AIF cannot have more than 1,000 investors and each investor must make a minimum commitment of INR 10 million, or INR 2.5 million in the case of employees of the sponsor or AIF manager. The AIF Regulations also mandate that a disclosure must be made to the investors if there is any breach of the provisions of the private placement memorandum.
Answer ... Offshore investment by resident Indians is subject to compliance with conditions stipulated under the Foreign Exchange Management (Non-debt Instruments) Rules, including compliance with the Liberalised Remittance Scheme issued by the Reserve Bank of India. The marketing of offshore funds in India must be undertaken carefully and registration of the offering document is mandatory if the offer qualifies as a public offering under Indian law.
Answer ... Any person providing ‘investment advice’ to resident Indians must seek registration under the Investment Adviser Regulations. Hence, appropriate advice must be sought before marketing offshore funds to Indian residents.
Answer ... No, the AIF Regulations specifically bar the marketing of AIFs to the public or to retail investors. Only sophisticated investors can invest in an AIF, since each investor must make a minimum commitment of INR 10 million in an AIF.