SEBI CIRCULAR SEBI/HO/AFD/PoD-1/P/CIR/2024/123
Modification in Framework for Valuation of Investment Portfolio of AIFs:
The Securities Exchange Board of India vide Circular dated 19th September 2024 (“SEBI CIRCULAR”) has indicated modification in the framework for the valuation of the securities which are not covered in the 22.1.1 of the Master Circular (“MC”) i.e. Unlisted Securities and Thinly Traded Listed Securities. Such change has been introduced on the recommendation by the AIF industry association, which in terms of membership represents at least 33% of the number of SEBI registered AIFs. The aforementioned association endorsed the International Private Equity and Venture Capital Valuation (IPEV) Guidelines for valuation in terms of clause 22.1.2 of MC.
The circular takes immediate effect and is intended to safeguard investors while ensuring regulatory compliance for AIFs.
Key highlights:
Uniform Valuation Norm: SEBI Introduced valuation norms for the thinly traded and non-traded securities which shall be calculated as per the norms endorsed by the AIF industry association. Valuation of other securities shall be carried as per norms specified by SEBI for Mutual Funds (MF Regulations).
Standard Change: The clause 22.2.2 & 22.2.3 of MC has been modified, which provides to comply with the clause 22.1 of MC such change in valuation shall not be construed as ‘Material Change’. Though such change of the valuation methodologies/ approaches both the old and new shall be disclosed to the investors to ensure transparency.
Eligibility Criteria: A new sub-clause has been inserted in the 22.3 of MC providing the eligibility criteria for independent valuer. Such independent valuers shall be registered with IBBI and must now meet specific qualifications (e.g., membership with ICAI, ICSI, ICMAI, or CFA Charter).
Change in Timeline: The deadline for reporting valuations based on Audited Investee data is extended to seven months (erstwhile six months). The due date for reporting now is October 31 each year.
Compliance: Trustees or sponsors must ensure compliance with these provisions as part of their “Compliance Test Report.”
Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement
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