SEBI Puts In Place Process For Dematerialising Units Of AIFs

Capital markets regulator SEBI on Monday specified the process to be followed for dematerialising the units issued, in cases where investors are yet to provide demat account details to Alternative Investment Funds (AIFs).

Under the rules issued in June, AIFs with a corpus of Rs 500 crore or more were required to dematerialise all issued units by Oct. 31, 2023.

Further, these AIFs will have to issue units only in dematerialised form from Nov. 1, 2023, onwards.

Similarly, AIFs with less than Rs 500 crore corpus will have to dematerialise issued units by April 30, 2024, and issue only dematerialised units May 1 onwards.    

The dematerialisation of AIF units is seen as a significant move towards digitisation, fostering transparency, and enabling effective monitoring of transactions in the financial landscape.    

In a circular on Monday, SEBI said managers of AIFs will continue to reach out to existing investors to obtain their demat account details and credit the units issued to them to their respective demat accounts. 

Further, depositories will also aid in this process as advised by SEBI.

The regulator said units already issued by schemes of AIFs to existing investors who have not provided their demat account details, will be credited to a separate demat account -- "Aggregate Escrow Demat Account".

This account will be opened by AIFs for the sole purpose of holding demat units of AIFs on behalf of such investors.    

As and when such investors provide their demat account details to the AIF, their units held in the Aggregate Escrow Demat Account will be transferred to the respective investors' demat accounts within five working days, the regulator said.     

The transfer of units of AIFs from/within the Aggregate Escrow Demat Account will not be allowed, it added.