The Securities and Exchange Board of India (Sebi) has asked fund managers of alternate investment funds (AIFs) to exercise stricter due diligence of investors to prevent the circumvention of rules.
Currently, AIFs have been designated as qualified institutional buyers (QIB).
The regulator says AIF fund managers should not facilitate investors who are ineligible for QIB status on their own from availing the benefits.
"For every scheme of AIFs having an investor, or investors belonging to the same group, who contribute 50% or more to the corpus of the scheme, necessary due diligence... shall be carried out prior to availing benefits available to QIBs under Issue of Capital and Disclosure Requirements Regulations and other Sebi Regulations," the regulator says in a circular on October 8.
Sebi adds that AIF managers should also avoid facilitating the ever- greening of stressed loans or assets.