Capital market regulator SEBI has made the manager and key management personnels of Alternative Investment Fund (AIF) responsible for appointing an independent valuer of asset, and ascertaining true and fair valuation of the investments of AIF schemes.
In case the established policies and procedures of valuation do not result in fair and appropriate valuation, the manager should deviate from the established policies and procedures to value the assets or securities at a fair value and document the rationale for such deviation, said the SEBI circular.
At each asset level, in case there is a deviation of over 20 per cent between two consecutive valuations or a deviation of over 33 per cent in a financial year, the manager shall inform the investors the reasons for the same, it added.
Valuation of securities not covered by SEBI norms should be carried out as per valuation guidelines endorsed by any AIF industry association, which has membership of at least 33 per cent of SEBI-registered AIFs. The eligible AIF industry association shall endorse appropriate valuation guidelines after taking into account recommendations of Alternative Investment Policy Advisory Committee of SEBI, it said.
The independent valuer should have at least three years of experience in valuation of unlisted securities and should not be associated with the manager, sponsor and trustee of the AIF.
The independent valuer should be registered with Insolvency and Bankruptcy Board of India and have membership of the Institute of Chartered Accountants of India or Institute of Company Secretaries of India or Institute of Cost Accountants of India or CFA Institute. It should be a holding company or subsidiary of a Credit Rating Agency registered with SEBI, it said.
AIFs need to report valuation based on audited data of investee companies as on March 31 to performance benchmarking agencies in six months.
An AIF has to obtain consent of 75 per cent of investors by value for launching ‘Liquidation Scheme’ during the liquidation period of one year of the original scheme.
Liquidation scheme is a close-ended scheme launched by an AIF only for the purpose of liquidating the unliquidated investments purchased from its scheme, whose tenure has expired.
SEBI recently allowed AIFs to deal with investments of their schemes which are not sold due to lack of liquidity during the winding up process, by either selling such investments to a new scheme of the same AIF or distributing such unliquidated investments.