Guidelines for AIFs to operate in International Financial Services Centres Issued;

SEBI issued a circular dated November 26, 2018 (“Circular”) to lay down operational guidelines for Alternative Investment Funds (“AIFs”) in International Financial Services Centres (“IFSCs”). The Circular provides for following provisions:

  • Registration of such AIFs: Any fund established or incorporated in IFSC, in the form of a trust, a company, a limited liability partnership or a body corporate, has to apply for registration to SEBI under the provisions of SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), along with a non-refundable application fee;
  • Compliance requirements, conditions and restrictions: Any person can invest in AIFs operating in IFSCs subject to the provisions listed in SEBI (International Financial Services Centre) Guidelines, 2015 (“IFSC Guidelines”). Further, any AIF operating in IFSC is permitted to make investment in terms of provisions listed in IFSC Guidelines;

    It is to be noted that each scheme of AIF operating in an IFSC shall have corpus of at least 3 million USD and it shall not accept an investment of less than 150,000 USD from any investor. Also, employees or directors of the AIF or employees or directors of the manager of such AIF, shall not invest less than 40,000 USD. Furthermore, the manager or sponsor of an AIF shall have a continuing interest in the AIF of atleast 2.5% of the corpus or 750,000 USD, whichever is lower, in the form of investment in the AIF;

    The sponsor or manager of an AIF (Category I and II) shall appoint a custodian registered with SEBI for safekeeping of securities if the corpus of the AIF is more than 70 million USD whereas It will be mandatory for Category III AIF to appoint a custodian;

    An angel fund operating in an IFSC shall have a corpus of at least 750,000 USD and shall not accept up to a period of 5 years, an investment of less than 40,000 USD from an angel investor. Furthermore, the manager or sponsor of such angel fund shall have a continuing interest in the angel fund of atleast 2.5% of the corpus or 80,000 USD, whichever is lesser; and
  • Miscellaneous: All provisions of the AIF Regulations and the guidelines and circulars issued thereunder, shall apply to AIFs setting up/ operating in IFSC, their investors, sponsors, managers and other intermediaries as applicable. However, the applicability of this Circular is subject to such conditions that may be prescribed by SEBI, RBI and other appropriate authority from time to time.