Sebi has notified that AIFs are inter-alia required to carry out a valuation of their investments in the manner specified by SEBI from time to time.
The notification specifies:
Valuation of securities for which valuation norms have already been prescribed under SEBI (Mutual Funds) Regulations,1996 (‘MF Regulations’), shall be carried out as per the norms prescribed under MF Regulations.
Valuation of securities which are not covered in para 3.1 above, shall be carried out as per valuation guidelines endorsed by any AIF industry association, which in terms of membership represents at least 33% of the number of SEBI registered AIFs.
The eligible AIFs shall endorse appropriate valuation guidelines after taking into consideration the recommendations of the Alternative Investment Policy Advisory Committee of SEBI.
The details of the valuation methodology and approach adopted under the stipulation guidelines for each asset class of the scheme of AIF shall also be disclosed in PPM.
Responsibility of the manager of AIF with regard to the valuation of investments of AIF:
The independent valuer must compute and carry out the valuation of the investments of the scheme of the AIF in the manner specified by the Board from time to time and the same must be ensured by the manager and the Key Managerial Personnel.
The manager shall be responsible for the true and fair valuation of the investments of the scheme of the AIF. If the established policies and procedures of valuation do not result in fair and appropriate valuation then the manager shall deviate from the established policies and procedures to value assets or securities at a fair and document the rationale for such deviation.
In case of a deviation of 20% or more between the two consecutive valuations or a deviation of more than 33% in a financial year, the same shall be informed with reasons/factors for the deviation both generic and specific not limited to changes in accounting policies/practices, valuation methodology and approach etc. and reasons thereof to the investors.
The change in the methodology and approach for the valuation of investments of the scheme of AIF shall be considered to be a change influencing the decision of the investors to continue investing in the scheme.
The AIF shall appoint an independent valuer satisfying the criteria specified by SEBI from time to time for valuing the investment portfolio of AIFs. The same shall be ensured by the Manager.
Reporting of valuation of investments of AIF to performance benchmarking agencies:
The manager shall ensure that the subscription agreement/ investment agreement with the investee company includes a specific time frame for providing audited accounts by the investee company to ensure reporting of valuation of audited data of investee companies as of 31st March to performance benchmarking agencies within the specified limit of six months.
The manager shall ensure that the audited data of the investee company is reported to performance benchmarking agencies after the audit of the books of accounts of AIF. Further, the manager shall also submit the report on SEBI Intermediary Portal in the format as specified.
The trustee/sponsor of AIF, as the case may be, shall ensure that the ‘Compliance Test Report’ prepared by the manager includes compliance with the provisions of this circular.
The provisions of this circular shall come into force with effect from November 01, 2023.
Link: SEBI | Standardised approach to valuation of investment portfolio of Alternative Investment Funds (AIFs)
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