Sebi Specifies Process for Dematerialisation of AIF Units

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In a significant move towards digitisation and fostering transparency, the Securities and Exchange Board of India (Sebi) has specified the process to be followed for dematerialising the units issued by Alternative Investment Funds (AIFs) in cases where investors have yet to provide their demat account details.

Dematerialisation Deadlines

Under the rules issued in June 2023, AIFs with a corpus of Rs 500 crore or more were required to dematerialise all issued units by October 31, 2023. These AIFs must now issue units only in dematerialised form from November 1, 2023, onwards. Similarly, AIFs with less than Rs 500 crore corpus have until April 30, 2024, to dematerialise issued units and must issue only dematerialised units from May 1 onwards.

Aggregate Escrow Demat Account

For existing investors who have not provided their demat account details, the units already issued by AIF schemes will be credited to a separate demat account called the Aggregate Escrow Demat Account. This account will be opened by AIFs solely for holding demat units of AIFs on behalf of such investors.

Transfer of Units

As and when these investors provide their demat account details to the AIF, their units held in the Aggregate Escrow Demat Account will be transferred to their respective demat accounts within five working days. However, the transfer of units of AIFs from or within the Aggregate Escrow Demat Account is not permitted.

The dematerialisation of AIF units is a crucial step towards enhancing transparency and enabling effective monitoring of transactions in the financial landscape. Sebi's specified process ensures that investors' interests are protected while facilitating the digitisation of AIF units.