AIFs: Sebi to introduce special situation funds for investments in stressed assets

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Mumbai: Sebi on Tuesday said Special Situation Funds (SSFs) that will invest only in stressed assets will be introduced and such funds will have a minimum corpus of Rs 100 crore. The decision, taken at the regulator’s board meeting, assumes significance against the backdrop of continuing efforts to address the issue of stressed assets in the banking system.

SSFs will be introduced as a sub-category under Category I Alternative Investment Funds (AIFs).

In a release after the board meeting, Sebi said SSFs will “invest only in stressed assets” such as stressed loans available for acquisition in terms of RBI norms or as part of a resolution plan approved under the Insolvency and Bankruptcy Code.

These funds will also invest in security receipts issued by Asset Reconstruction Companies (ARCs), securities of companies in distress and any other “asset/security as may be prescribed by the board from time to time”.

In this regard, AIF Regulations will be amended by Sebi.

According to the regulator, SSFs will be exempted from investment concentration norm in a single investee company and there will also be no restriction on investing their investible funds in unlisted or listed securities of the investee company.

Further, minimum investment by an investor has to be Rs 10 crore and Rs 5 crore in case of an accredited investor, and the minimum corpus has to be Rs 100 crore.

“Initial and continuous due diligence requirements mandated by RBI for ARCs’ investors shall also be applicable to SSFs while acquiring stressed loans in terms of Reserve Bank of India (Transfer of Loan Exposures) Directions, 2021,” the release said.

Separately, the Sebi board on Tuesday decided to amend norms to provide for revised net worth requirement for Trading Members (TMs), Self-Clearing Members (SCMs), Clearing Members (CMs), Professional Clearing Members (PCMs) and Depository Participants (DPs) as well as with respect to Deposit & Fees requirement for members in Electronic Gold Receipt (EGR) segment.

Among others, the changed norms will prescribe the definition of Professional Clearing Member. Amendments will also be made to bring revised networth requirement within prescribed timelines for stock broker depository participant.