Sebi introduces framework for Special Situation Funds

Capital markets regulator Sebi has introduced the framework for Special Situation Funds (SSFs) that will invest only in stressed assets. The move assumes significance against the backdrop of continuing efforts to address the issue of stressed assets in the banking system.

SSFs have been introduced as a sub-category under Category I Alternative Investment Funds (AIFs), Sebi said in a notification on Monday.

SSFs will invest only in stressed assets such as stressed loans available for acquisition in terms of RBI norms or as part of a resolution plan approved under the Insolvency and Bankruptcy Code.

These funds will also invest in security receipts issued by Asset Reconstruction Companies (ARCs), securities of companies in distress and any other asset/security as may be prescribed by the board from time to time.

''Each scheme of a special situation fund shall have a corpus as may be specified by the Board (Sebi),'' the regulator said.

Further, SSFs will accept from an investor, an investment of such value as specified by the regulator. It will not accept investments from any other AIF other than a special situation fund.

In this regard, the Securities and Exchange Board of India (Sebi) has amended AIF rules.

Last month, at its board meeting, Sebi decided that SSFs will be exempted from investment concentration norm in a single investee company and there will also be no restriction on investing their investible funds in unlisted or listed securities of the investee company.

The minimum investment by an investor can be Rs 10 crore, whereas it can be Rs 5 crore in the case of an accredited investor, and that the minimum corpus will be Rs 100 crore, Sebi had said.

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