{"id":87203,"date":"2024-07-15T17:26:16","date_gmt":"2024-07-15T11:56:16","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=87203"},"modified":"2024-07-15T17:26:20","modified_gmt":"2024-07-15T11:56:20","slug":"sebi-mandates-aifs-to-maintain-investments-in-demat-form","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/sebi-mandates-aifs-to-maintain-investments-in-demat-form\/","title":{"rendered":"SEBI Mandates AIFs to Maintain Investments in Demat Form"},"content":{"rendered":"

During its 203rd<\/sup> meeting on 25th<\/sup> November 2023, the Securities and Exchange Board of India (SEBI) made a notable change by updating the SEBI (Alternative Investment Funds) Regulations, 2012. The amendments are intended to improve compliance and strengthen investor protection in Alternative Investment Funds (AIFs).<\/p>\n\n\n\n

An Alternative Investment Fund (AIF) is a private fund that collects money from investors to invest in different types of assets, such as real estate, private equity, hedge funds, or alternative investments.<\/p>\n\n\n\n

In a circular, SEBI stated that starting from 1 October 2024, all investments made by AIFs must be held in dematerialised form under the new framework. Investments made before this date are not subject to exemptions unless the investee company is mandated by law to facilitate dematerialisation or if the AIF, either on its own or in conjunction with other SEBI-registered entities, has control over them.<\/p>\n\n\n\n

SEBI Enforces Demat & Custodians for AIFs<\/h2>\n\n\n\n

Through an amendment<\/a> to the SEBI (Alternative Investment Funds) Regulations, 2012, SEBI now requires AIFs to invest in demat form and hire a custodian for all categories. Investments made before this date are not subject to this rule unless the investee company is legally obligated to enable dematerialisation or if the AIF, either by itself or in conjunction with other SEBI-registered entities, has influence over the investee company.<\/p>\n\n\n\n

Dematerializing Investments for Alternative Investment Funds<\/h2>\n\n\n\n

Any new funds put into Alternative Investment Funds<\/strong><\/a> after September 2024 must be kept in dematerialised form. AIFs’ current investments are not subject to the requirement except when:<\/p>\n\n\n\n

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  1. The investee company is legally required to help convert its securities into dematerialised form, as mandated by the Ministry of Corporate Affairs for private limited companies.<\/li>\n\n\n\n
  2. In investments in which the AIF, alone or in conjunction with other SEBI-registered intermediaries\/entities required to keep their investment in dematerialised form, exercise control over the investee company.<\/li>\n<\/ol>\n\n\n\n

    Further, the said requirement is exempted for investments held by<\/p>\n\n\n\n