New Delhi: Markets regulator Sebi on Friday issued a draft circular clarifying the operational framework for maintaining pro-rata and pari-passu rights of investors in Alternative Investment Funds (AIFs).
Pro-rata refers to sharing profits in proportion to investment, while pari-passu ensures equal treatment of all investors. Sebi proposed that for closed-ended AIF schemes, investor rights in profit distribution should be based either on total commitment or undrawn commitment, as clearly disclosed in the Private Placement Memorandum (PPM).
Schemes must disclose the calculation method upfront and cannot alter it later. Investors excluded from a specific investment cannot have their unused commitment diverted elsewhere, Sebi said.
The draft also mandates that no investor should exceed prescribed concentration limits in an investee company.
Existing schemes may continue their current method if compliant, but future investments must align with the new norms.
For open-ended Category III AIFs, pro-rata drawdowns may not apply, though proceeds should be distributed in proportion to units held.
However, investments in unlisted securities must follow the same rules as closed-ended schemes.
The regulator has invited public comments till November 28, following amendments to AIF regulations made in November and December 2024. Agencies