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An Alternative Investment Fund (AIF) is a body that pools the funds of high-net-worth individuals and invests it as per the needs of the investors. To regulate the unregulated funds and ensure stability and market efficiency, encourage new capital formation, and protect the interest of the investors, SEBI proposed to frame SEBI (Alternative Investment Funds) Regulations, 2012 (SEBI (AIF) Regulations, 2012). This Regulation replaced the SEBI (Venture Capital Funds) Regulations 1996. The need for a regulatory framework arises to detect fraud, unfair trade practices and to minimize conflicts of interest. Role of a sponsor or a manager is a person who ensures that the investment of funds in an AIF is done as per the regulatory requirements.
Sponsors are person or persons who set up an AIF. The sponsor includes a promoter in the case of a company and a designated partner in the case of a Limited Liability Partnership (LLP). A Manager of the AIF who as per the SEBI (AIF) Regulation 2012[1] is a person or an entity who is appointed to manage the investments. A sponsor can also be a manager of the Fund. Continue reading this blog, to know about the role of a sponsor or manager in AIF.
The role of a sponsor or manager in an AIF is as follows:
As seen above, the role of a sponsor or manager is quite vast. Apart from managing the AIF, the sponsor or manager also ensures that proper reporting is done to the investors as well as to SEBI. They also ensure that the funds of the AIF are properly invested. Thus, it can be said that sponsors or managers play a vital role in the functioning of an AIF.
Read our Article: Operational Aspect of Amendment to SEBI AIF Regulations
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