In the push for dematerialisation of alternative investment funds (AIFs) units, the market regulator has issued guidelines on how the funds should proceed if the investor has not provided his/her demat account details.
The funds have been asked to transfer the units to a separate demat account--called the Aggregate Escrow Demat Account--and the units are to be held there till the client provides his/her demat account details.
When the regulator had pushed for dematerialisation of AIF units, one of the concerns the fund managers had raised was that their investors may not have demat accounts or may not provide the demat account details when asked. This latest circular from the Securities and Exchange Board of India (Sebi) has addressed that concern.
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In a circular issued on December 11, Sebi said, "This account (the escrow account) shall be opened by AIFs for the sole purpose of holding demat units of AIFs on behalf of such investors. New units to be issued in demat form shall be allotted to such investors and credited to the Aggregate Escrow Demat Account."
The circular added that as and when investors provide their demat account details to the AIF, their units held in this escrow account must be transferred to the respective investors’ demat accounts within five working days. Also, no transfer of the AIF units from the escrow account should be done for any other reason.
Schemes of AIFs with a corpus greater than or equal to Rs 500 Crore should credit units issued to investors (on-boarded before November 1, 2023) who have not provided their demat account details, into Aggregate Escrow Demat Account by January 31, 2024.
Schemes of AIFs with a corpus less than Rs 500 crore should credit units issued to their investors who have not provided their demat account details by April 30, 2024, into Aggregate Escrow Demat Account latest by May 10, 2024.
The same deadlines apply for the respective funds for the transfer of units into the investors' demat accounts if the investors have provided the demat account details.
Managers of AIFs have been asked to maintain investor-wise KYC details of units held in the escrow account, including name, PAN and bank account details, along with an audit trail of the transactions. These details have to be reported to depositories and custodians every month.
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