SEBI Tightens Grip on Alternative Investment Funds for Compliance

SEBI has mandated Alternative Investment Funds to conduct thorough due diligence to prevent legal circumvention and ensure regulatory compliance. AIFs designated as QIBs or QBs are required to scrutinize investors and investments. Due diligence is also emphasized for investments from countries bordering India as per Foreign Exchange Management Rules.

The Securities and Exchange Board of India (SEBI) announced new directives urging Alternative Investment Funds (AIFs) and their managers to implement meticulous due diligence practices. This step aims to prevent the circumvention of laws and to ensure strict adherence to regulatory frameworks.

According to SEBI's circular, AIFs and their managers are now obliged to thoroughly vet their investors and investment portfolios. Notably, those designated as Qualified Institutional Buyers or Qualified Buyers need to ensure that investors ineligible for this status do not gain undue benefits via the AIFs.

Furthermore, SEBI has imposed due diligence requirements for investments from countries sharing land borders with India, aligning with the Foreign Exchange Management Rules. AIFs must also adhere to guidelines from the Reserve Bank of India when dealing with RBI-regulated entities.