Sebi Revises AIF Rules: Proportional Rights for Investors

SEBI has updated rules for Alternative Investment Funds, mandating that investors receive rights proportional to their financial contributions. This move clarifies AIFs as pooled investment vehicles and ensures fair treatment for all investors. Large Value Funds, however, are exempt from ensuring equal rights among investors.

The Securities and Exchange Board of India (Sebi) has amended regulations governing Alternative Investment Funds (AIFs), specifying that investors should receive rights in investment and distribution in accordance with their financial commitments to a scheme.

The new rules clarify that both risks and rewards from AIF investments ought to be shared proportionally by investors based on their contributions. This regulatory change emphasizes AIFs' role as pooled investment entities and seeks to guarantee equitable treatment for all investors.

Notably, Sebi has allowed for differential rights to be offered to select investors without compromising the interests of others in a scheme. Yet, Large Value Funds have been provided an exemption from the requirement of maintaining equal rights, contingent upon each investor waiving their pari-passu rights.

(With inputs from agencies.)