SEBI's New Mandates for AIFs: Dematerialization of Investments and Custodian Appointment - Implications for India's Investment Ecosystem

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....he document addresses key issues such as the mandatory dematerialization of AIF investments and the appointment of custodians. These updates have substantial implications for AIFs, investors, and the broader Indian financial market. Key Issues Identified * Mandatory Dematerialization of AIF Investments: Starting October 1, 2024, all investments made by AIFs must be held in dematerialized form. Exceptions are noted for investments made prior to this date, under specific conditions. * Appointment of Custodians for AIFs: The circular mandates the appointment of custodians for the safekeeping of AIF securities. It outlines specific conditions under which an associate of an AIF's sponsor or manager may act as a custodian. * Repo....

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....ns: These changes are expected to bring about a more structured and secure investment environment in India, aligning it with international standards. This could potentially attract more foreign investment in Indian AIFs. Conclusion SEBI's latest circular is a significant step towards modernizing India's Alternative Investment Funds. While it presents immediate challenges in terms of compliance and adaptation, the long-term benefits in terms of market integrity, investor protection, and alignment with global practices are substantial. This move is expected to strengthen the foundation of India's investment landscape, making it more attractive to both domestic and international investors. This article has been crafted to provid....