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SEBI formalises investment committees for PE, VC funds
Photo Credit: Reuters

The Securities and Exchange Board of India (SEBI) has rolled out its latest amendment to the rules governing alternative investment funds (AIFs), which formally recognises the concept of an investment committee. 

To be clear, most domestic funds already follow have in place their own investment committees. The amendment only appears to formally recognise the requirement of an investment committee in the AIF regime.   

The amendment introduced this week says that the fund manager will be responsible for investment decisions provided that the vehicle may constitute an investment committee to approve the decisions.  

Significantly, it says external members whose names do not figure in the investment documents can only be appointed to the committee if they are approved by 75% of the limited partners or investors “by value of their investment”.

“SEBI has given formal recognition to the concept of investment committees in the context of AIFs,” Sudip Mahapatra, partner at S&R Associates, said. 

Mahapatra noted that, as the regulations make the investment manager and the investor committee equally responsible for the investment decisions, this will mean enhanced liability for independent members or representatives of limited partners serving on these committees. 

The latest amendment also specifies that at least one key personnel managing the fund should have more than five years of experience in advising or managing pools of capital in fund or asset management. It also outlines the basic expectations that the regulator has in terms of qualifications. 

At least one key personnel should have professional qualifications in “finance, accountancy, business management, commerce, economics,  capital market or banking from a university or an institution recognized by  the central or any state government or a foreign university, or a CFA (chartered financial analyst) charter”, the notice says. 

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