SEBI vide Circular dated 9th December 2022 has highlighted certain criteria (effective immediately) which need to be verified by investment managers while accepting foreign investment into AIFs.
As per the Circular, a foreign investor in an AIF:
1] Is from the jurisdiction whose securities market regulator is a signatory to the IOSC’s Multilateral Memorandum of Understanding or a signatory to the bilateral Memorandum of Understanding with SEBI. Government / Government related investors not meeting this criterion will be permitted, if coming from a jurisdiction approved by Indian Government
2] Is not a person mentioned in the Sanctions List notified by the UNSC
3] Is not a resident of a country black listed or grey listed by FATF
Conditions (2) and (3) also apply to underlying investors contributing 25% or more in the corpus of the foreign investor.
The Circular also prohibits AIFs to drawdown further capital contribution from existing investors who subsequently have failed to meet the above criteria, till the time these conditions are met by the investors.