Sebi Introduces New Requirements for Alternative Investment Fund Managers
The Securities and Exchange Board of India (Sebi) has issued a new circular making it mandatory for at least one key member of an Alternative Investment Fund’s (AIF) investment team to have the relevant certification from the National Institute of Securities Market (NISM). The move comes as part of Sebi’s efforts to strengthen the regulatory framework for managing AIFs. Below is an overview of the new requirements:
New Rules for AIF Managers
- AIF managers must have at least one key personnel on their investment team with the relevant NISM certification.
- The certification required is the NISM Series-XIX-C, also known as the Alternative Investment Fund Managers Certification Examination.
- Compliance is mandatory for all existing AIF schemes and those pending at Sebi before May 10, 2024.
- The requirement must be fulfilled on or before May 9, 2025.
Sebi notes that the new requirements are aimed at ensuring that AIFs are managed by experienced and qualified personnel and strengthen the risk management framework.
Risk Management Framework for KYC Registration Agencies
In a separate circular, Sebi also outlined a new risk management framework for KYC registration agencies. The new provisions simplify the existing risk management framework, which was developed based on feedback from stakeholders in the securities market.
Under the new framework, KYC Registration Agencies (KRAs) must verify the PAN, name, and address of all clients’ records within two days of receiving their KYC records. The exchanges, intermediaries, and depositories involved must complete the necessary technical changes to comply with the new framework by May 31, 2024.
Key Takeaways
- Sebi has made it mandatory for AIF managers to have at least one key personnel with the relevant NISM certification.
- The new requirements strengthen the regulatory framework for AIFs and aim to ensure they are managed by experienced and qualified personnel.
- KYC registration agencies must verify clients’ PAN, name, and address records within two days of receiving KYC records.
- The new framework simplifies the existing risk management framework for KRAs and aims to make compliance easier for stakeholders.
- These new requirements came into effect on May 10, 2024.
The new rules and framework aim to protect investors and strengthen the overall regulatory framework for AIFs and KYC registration agencies.
Furthermore, it is important to note that Sebi’s decision to require the NISM certification for AIF managers underscores the regulator’s commitment to enhancing market confidence and ensuring fair market practices. By mandating that at least one key member of an AIF’s investment team has the requisite certification, Sebi aims to ensure that the managers hired to oversee AIFs have the knowledge and experience needed to manage risks effectively and generate returns in line with expectations.
In the same vein, the changes to the risk management framework for KYC registration agencies seek to make it easier for stakeholders in the securities market to comply with the rules. By simplifying the framework, Sebi aims to reduce the burden of compliance while still ensuring robust risk-management practices. This decision comes after Sebi reviewed the provisions of the regulatory framework with feedback from stakeholders and determined that it would help to promote better compliance with the rules.
In order to further drive compliance with these new rules, it is important for investors to stay informed about Sebi’s updates and regulations. Investors should not hesitate to seek clarification from their investment managers or financial advisors, particularly if they have investments in AIFs. This is because the new requirements will affect both existing and future AIF schemes that are yet to be launched. Therefore, investors must stay up-to-date with any policy changes that may impact their investments.
In conclusion, Sebi’s decision to introduce new certification requirements for AIF managers and simplify the risk management framework for KYC registration agencies stems from the regulator’s commitment to strengthening the Indian securities market. These changes aim to reinforce investor confidence and ensure regulatory compliance while promoting transparency and accountability across the securities market. As a result, stakeholders should stay informed about the new rules while working with investment managers and financial advisors to navigate these changes in the best possible manner.
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Estabizz Fintech compiled the material in this article using the most recent Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and material applicable at the time. They ensured the completeness and correctness of the material through due diligence. When using this material, users must consult the relevant, applicable legislation. The given data may change without prior notice and does not constitute professional advice. Estabizz Fintech disclaims all liability for any results from the use of this material.
