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Simplifying Alterations in the PPM terms of AIFs via Merchant Banker

Security Exchange Board of India released a circular focusing on modifications to the terms of Private Placement Memorandum (PPM) for Alternative Investment Funds (AIFs).

The circular, referencing para 2.5.3 of the SEBI Master Circular No. SEBI/HO/AFD/PoD1/P/CIR/2023/130 dated July 31, 2023, pertains to AIFs and their requirement to inform SEBI about changes in their PPM. Initially, any such changes had to be submitted through a merchant banker along with a due diligence certificate.

However, based on feedback from market participants, SEBI has reviewed this requirement and identified certain modifications to the PPM terms that no longer necessitate submission through a merchant banker. Accordingly, it has been decided that the changes in the terms of PPM, as mentioned, may not be required to be submitted through a merchant banker and may be filed directly with SEBI:


Sections of PPM where any change carried out is not required to be filed through Merchant Banker:

a. Write-up on Market Opportunity/ Indian Economy/ Industry Outlook (Section II of the template PPM


b. Track record of investment manager (Section VI of the template PPM)


c. Risk factors (Section X of the template PPM)


d. Legal regulatory and tax Consideration (Section XI of the template PPM)


Specific changes in PPM which are not required to be filed through Merchant Banker:

a. Change in contact details (address, phone number etc.) of AIF, sponsor, manager, trustee or custodian (except such changes for which regulatory approval is required or if the new contact details of sponsor or manager of AIF is of a foreign jurisdiction)

b. Change of auditor, RTA, legal advisor or tax advisor


c. Change in size of the Fund/Scheme


d. Change in information related to Affiliates


e. Change in commitment period


f. Changes in Key Investment Team of the manager subject to at least one key personnel fulfilling the requirement mentioned under Regulation 4(g) of SEBI (AIF) Regulations, 2012(‘AIF Regulations’)


g. Changes in Key Management Personnel of AIF or the Manager (except if changes are due to change in control of manager or sponsor)


h. Change in advisory board/advisory committee/investment committee or any other committee (except if such committees are set up to approve the decisions of the AIF)


i. Reduction in any of the expense or fee or cost charged  to  fund/investors  (including management fee)


j. Inclusion of new disclosure or change in existing disclosure pursuant to a regulatory mandate, such as mandate to include investor charter in PPM, updation of investor complaints data for last three financial years, etc.


k. Other factual and routine updates, such as change in designation or qualification of members/directors, compliance officer, operating partners, portfolio company advisor, glossary, etc.


Further Large Value Funds for Accredited Investors (LVFs) are exempt from the merchant banker requirement altogether. LVFs can directly submit any alterations to the PPM terms to SEBI.


AIFs, including LVFs, are required to submit any changes to the PPM terms directly to SEBI along with a duly signed and stamped undertaking. This undertaking must be provided by the CEO of the AIF's manager (or an equivalent role) and the Compliance Officer of the AIF's manager, as per the specified format provided by SEBI.


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