SEBI vide its Circular dated 11th April, 2023 issued for All Alternative Investment Funds (AIFs)
The circular states:
SEBI has observed that, there is inconsistency and lack of adequate disclosure with respect to certain industry practices. Alternative Investment Policy Advisory Committee (‘AIPAC’) recommend that an AIF may excuse its investor from participating in a particular investment in the following circumstances:
The investor based on the opinion of a legal professional/legal advisor, confirms that its participation in the investment opportunity would be in violation of an applicable law or regulation; or
The investor, as part of contribution agreement or any other agreement signed with the AIF, had disclosed to the manager that participation of the investor in such investment opportunity would be in contravention to the internal policy of the investor.
AIF shall exclude an investor from participating in a particular investment opportunity, if the manager of the AIF is satisfied that the participation of such investor in the investment opportunity would lead to the scheme of the AIF being in violation of applicable law or regulation or would result in material adverse effect on the scheme of the AIF.
The investor of an AIF is also an AIF or any other investment vehicle, such investor shall be partially excused from participation in an investment opportunity, to the extent of the contribution of the said fund/investment vehicle’s underlying investors who are to be excused or excluded from such investment opportunity.
This circular shall come into force with immediate effect.
Link of the circular: https://www.sebi.gov.in/legal/circulars/apr-2023/guidelines-with-respect-to-excusing-or-excluding-an-investor-from-an-investment-of-aif_69995.html
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