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The Securities and Exchange Board of India ("SEBI"), vide notification dated October 8, 2024, has outlined specific due diligence requirements for Alternative Investment Funds ("AIFs"), their managers, and key management personnel with respect to investors and investments of the AIF. Some of the key points are as follows:
- carrying out due diligence for investments from countries sharing land borders with India, in line with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. For every scheme of AIFs where 50% or more of the corpus of the scheme is contributed by the prescribed investors, necessary due diligence as per the implementation standards formulated by the Standard Setting Forum for AIFs must be carried out prior to the investment;
- carrying out due diligence prior to Qualified Institutional Buyers ("QIBs") (under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018) availing benefits designed for QIBs and Qualified Buyers ("QBs") (under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) availing benefits designed for QBs, for every scheme of AIFs having an investor or investors belonging to the same group, who contribute(s) 50% or more to the corpus of the scheme. AIFs must ensure that investors who are not eligible for QIB or QB status do not avail of the benefits through the AIF;
- if an investor of the scheme is an AIF or a fund set up outside India or in International Financial Services Centres ("IFSCs") in India, then the criteria check for investor(s) will be regulated by RBI; and
- reporting of any existing investments that fail the due diligence checks or confirm compliance by April 7, 2025.
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