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SEBI has directed AIFs to hold their investments in dematerialised form, unless exempted by SEBI.
Any investment made by an AIF on or after October 1, 2024 has to be held in dematerialized form, irrespective of whether the investment is made directly in the investee company or is acquired from another entity.
The investments made by an AIF prior to October 1, 2024 are exempted from this requirement. However, two exceptions to this exemption are when investee company is responsible to facilitate dematerializations of securities or when AIF alone or along with other SEBI entities has control over the investee company in that case, the investments made by an AIF prior to October 01, 2024 will have to be held in dematerialised form on or before Jan 31, 2025.
Appointment of custodian
SEBI has directed the sponsor or manager of the AIF to appoint a registered custodian prior to the date of first investment of the scheme.
Existing schemes of Category I and II AIFs, which have corpus less than or equal to Rs 500 crore and holding at least one investment as on Jan 12, 2024, should appoint custodian on or before January 31, 2025.
In case of AIFs with custodians that are associates of their manager or sponsor, managers of AIFs in this case will have to ensure compliance with AIF Regulations on or before January 31, 2025.