NISM Series XIX-C cheat sheet

AIF defined under SEBI (AIF) Regulations, 2012: privately pooled funds collecting from investors to invest per a defined policy; excludes mutual funds, family trusts, employee benefit funds, and holding structures.

AIFs must register with SEBI; no AIF may launch a scheme without prior registration and scheme-level filing with SEBI.

Permitted legal forms: trust, company, LLP, or body corporate. Most Indian AIFs are trusts with a trustee (registered debenture trustee) and an Investment Manager.

Minimum corpus per scheme: INR 20 crore; minimum investor commitment: INR 1 crore; managers/employees/sponsors may commit INR 25 lakh.

Maximum investors per scheme: 1,000 (excluding manager, employees, sponsors); schemes with unit-listing on a stock exchange may exceed this cap.

Minimum own contribution by manager/sponsor: 2.5% of corpus or INR 5 crore, whichever is lower, in Category I and II; 5% or INR 10 crore in Category III.

Close-ended schemes: tenure minimum 3 years; extension up to 2 years requires two-thirds investor consent by value.

Scheme of AIF cannot be launched until the previous scheme is fully wound up, except for fund-of-AIFs or where the scheme is fully invested with no redemption obligations.

Registration fee and renewal every 5 years; annual compliance reporting to SEBI through the AIF portal with audited financials.

Investment Manager runs the scheme; trustee (for trusts) or board (for companies/LLPs) oversees and ensures compliance with the AIF Regulations and the trust deed/agreement.

Manager must be registered with SEBI as an Investment Manager or be a subsidiary of a registered manager; must have a minimum net worth of INR 2 crore (INR 5 crore for Category III).

Key personnel of manager require SEBI's fit-and-proper criteria: no conviction for fraud, no insolvency, no regulatory debarment.

Manager must file a PPM (Private Placement Memorandum) with SEBI at least 30 days before launch, and cannot accept investor commitments until the PPM is filed.

Annual compliance: audited accounts, compliance certificate, investor grievance report, and portfolio disclosure to investors within 180 days of financial year-end.

Manager must report material changes to SEBI within 30 days (change in control, sponsor, key personnel, or scheme terms).

Conflicts of interest: manager must not invest scheme assets in its own affiliates without investor consent and disclosure; related-party transactions must be on arm's-length terms.

Investor grievance redressal: manager must designate a compliance officer and respond to complaints within 30 days; unresolved matters escalate to SEBI SCORES.

Category I: socially or economically desirable - venture capital, SME funds, infrastructure funds, angel funds. Positive list; may use leverage only for operational needs.

Category II: private equity and debt funds not in Category I or III; cannot use leverage except for meeting temporary funding needs; no complex strategies.

Category III: hedge funds and funds using complex strategies, derivatives, leverage; must appoint a custodian and use leverage within disclosed limits.

Angel funds: sub-category of Category I; minimum investor INR 25 lakh, max 49 investors, investment horizon 3 years, max INR 10 crore per investee.

Valuation: Category I and II - investments valued at cost until fair value is available; Category III - mark-to-market at least monthly; independently valued by a SEBI-registered valuer annually.

Leverage limits: Category III may leverage up to 2x NAV; Category I and II only for temporary funding and cannot exceed 1.25x of NAV.

Risk management: manager must maintain a risk management framework, stress testing for Category III, and disclose valuation policy in the PPM.

Portfolio concentration: no single investee may exceed 25% of the scheme's corpus, except for Category III where disclosed limits apply.

AIF units are sold only by private placement; no public advertisement, no general solicitation, minimum INR 1 crore commitment per investor.

Distributors must be SEBI-registered; fees must be disclosed in the PPM and cannot be paid out of scheme assets without investor consent.

Investors must be provided with PPM, scheme terms, and a term sheet before commitment; investor consent must be documented.

Suitability and KYC: manager must verify accredited-investor status and complete KYC/AML before accepting commitments.

Reporting to investors: quarterly portfolio reports and annual audited statements; NAV disclosure for Category III at least monthly.

Ethical practices: no front-running, no mis-selling, no misrepresentation of past performance, no guaranteed returns; performance must be shown net of fees.

Insider trading and conflict-of-interest policies required; personal trading by employees must be monitored and disclosed.

Operational: separate scheme accounts, custodian for Category III, and records retained for at least 5 years (8 years for AML records).