TaxTMI 
TaxTMI 
Participation of AIFs in Credit Default Swaps
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....tified on January 09, 2023 to allow AIFs to participate in Credit Default Swaps ('CDS') as protection buyers and sellers. Copy of the notification is available at link. 2. Regulations 16(1)(aa), 17(da), 18(ab) and 20(11) of AIF Regulations enable AIFs to participate in CDS in terms of the conditions as may be specified by SEBI from time to time. In this regard, the following is specified: A. Co....
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....amount of the said CDS exposure. Such earmarked securities may also be used for maintaining applicable margin requirements for the said CDS exposure. Exposure to CDS undertaken in the aforesaid manner shall not tantamount to leverage. 2.5. Total exposure to an investee company, including exposure through CDS, shall be within the limit of applicable concentration norm as specified in AIF Regulati....
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....in the manner as mentioned at para 2.4 above, in case the amount of earmarked securities falls below CDS exposure: a. The AIF shall send a report to custodian on the same day of the breach. b. The AIF shall bring the amount of earmarked securities equal to CDS exposure and report details regarding rectification of breach to custodian, by the end of next trading day. c. In case the AIF fails ....
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....CDS, shall maintain thirty days cooling off period between the two periods of borrowing or engaging in leverage. 2.12. All CDS transactions shall be on a platform regulated by SEBI or Reserve Bank of India ('RBI'), to enhance transparency and disclosure. 2.13. AIFs transacting in CDS, shall also ensure compliance with applicable provisions of RBI notification on 'Master Direction - Reserve Ban....