17 SEBI Mandates Investor Charter and Complaint Disclosure for AIFs to Enhance Transparency

Key Takeaways:

- AIFs must disclose the Investor Charter in their PPM to inform investors about services, grievance redressal mechanisms, and responsibilities.

- AIFs must disclose data on investor complaints received and their redressal status as a separate chapter in the PPM.

- AIFs must maintain data on investor complaints and compile it within 7 days from the end of each quarter.

- The disclosure requirements are in addition to existing regulations and circulars on investor grievance handling mechanisms.

Detailed Narrative:

The Securities and Exchange Board of India (SEBI) has introduced a new framework to enhance transparency and investor protection in the Alternative Investment Funds (AIFs) industry. Through a circular (SEBI/HO/IMD/IMD-I/DOF9/P/CIR/2021/682 dated December 10, 2021), SEBI has mandated AIFs to disclose an Investor Charter and provide detailed information on investor complaints and their redressal status.

The Investor Charter is a comprehensive document that outlines the services provided to investors, details of the grievance redressal mechanism, and the responsibilities of investors. SEBI has prepared a standardized Investor Charter (Annexure 15 of the circular), and AIFs are required to disclose this charter in their Private Placement Memorandum (PPM).

In addition to the Investor Charter, AIFs must also include a separate chapter in their PPM dedicated to disclosing data on investor complaints received against the AIF and each of its schemes, along with the redressal status of these complaints. The format for this disclosure is provided in Annexure 16 of the circular.

To ensure effective monitoring, AIFs are required to maintain data on investor complaints as per Annexure 18 of the circular, which must be compiled within 7 days from the end of each quarter.

These disclosure requirements are supplementary to the existing regulations, circulars, and directions issued by SEBI pertaining to investor grievance handling mechanisms. The new framework aims to bring about greater transparency and accountability in the AIF industry, empowering investors with relevant information and ensuring that their concerns are addressed promptly and effectively.

FAQs:

Q1: What is the purpose of the Investor Charter?

A1: The Investor Charter is a comprehensive document that outlines the services provided to investors, details of the grievance redressal mechanism, and the responsibilities of investors. It aims to provide investors with relevant information about the AIF's operations and their rights.

Q2: How will AIFs disclose the Investor Charter?

A2: AIFs are required to disclose the Investor Charter, as provided in Annexure 15 of the SEBI circular (SEBI/HO/IMD/IMD-I/DOF9/P/CIR/2021/682 dated December 10, 2021), in their Private Placement Memorandum (PPM).

Q3: What information must AIFs disclose regarding investor complaints?

A3: AIFs must include a separate chapter in their PPM dedicated to disclosing data on investor complaints received against the AIF and each of its schemes, along with the redressal status of these complaints. The format for this disclosure is provided in Annexure 16 of the circular.

Q4: How frequently must AIFs maintain data on investor complaints?

A4: AIFs are required to maintain data on investor complaints as per Annexure 18 of the circular, which must be compiled within 7 days from the end of each quarter.

Q5: Are there any existing regulations or circulars related to investor grievance handling mechanisms?

A5: Yes, the disclosure requirements introduced by this circular are in addition to the existing regulations, circulars, and directions issued by SEBI pertaining to investor grievance handling mechanisms.

Key Precedents:

The circular (SEBI/HO/IMD/IMD-I/DOF9/P/CIR/2021/682 dated December 10, 2021) references the following annexures, which provide the specific formats and guidelines for AIFs to comply with the new disclosure requirements:

1. Annexure 15: Investor Charter for Alternative Investment Funds (AIFs)

2. Annexure 16: Format for disclosure of investor complaints by AIFs

3. Annexure 18: Format for maintaining data on investor complaints by AIFs

It is crucial for AIFs to accurately disclose the information as per the prescribed formats in these annexures to ensure compliance with the new SEBI guidelines.

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Here's AIF master Circular's verbatim Chapter 17

Chapter 17 - Investor Charter and Disclosure of complaints bv AIFs{50}

With a view to providing relevant information to investors about the various activities pertaining to AIFs, an Investor Charter has been prepared by SEBI. In this regard, it is specified as under:

17.1. The Investor Charter is a brief document containing details of services provided to investors, details of grievance redressal mechanism, responsibilities of the investors etc., at one single place, in lucid language for ease of reference.

17.2. In this regard, all AIFs shall take necessary steps to bring the Investor Charter, as per Annexure 15, to the notice of their investors by disclosing Investor Charter in the Private Placement Memorandum (PPM).

17.3. Additionally, in order to bring about further transparency in the Investor Grievance Redressal Mechanism, data on investor complaints received against AIFs and each of their schemes and redressal status thereof shall be disclosed by all AIFs as per format at Annexure 16, as a separate chapter in the PPM.

17.4. For effective monitoring, AIFs shall maintain data on investor complaints as per Annexure 18, which shall be compiled latest within 7 days from the end of quarter.

17.5. These disclosure requirements are in addition to the existing requirements pertaining to the investor grievance handling mechanism under various Regulations, circulars and directions, issued by SEBI.

Note:-

{50}SEBI Circular No. SEBI/HO/IMD/IMD-I/DOF9/P/CIR/2021/682 dated December 10, 2021