SEBI Eases Timeline for Dematerialisation of AIF Investments

In a move to streamline regulatory compliance for Alternative Investment Funds (AIFs), SEBI has provided additional time for funds to transition their holdings into dematerialised (demat) form. The revised framework balances investor protection with operational flexibility, ensuring smoother implementation.

Revised Timeline for AIF Investment Dematerialisation

As per SEBI’s circular issued on 16 February, all investments made by AIFs on or after 1 July must be held in dematerialised form, regardless of whether they are acquired directly or through another entity. However, investments made before this date are exempt, except in specific circumstances.

Under the updated guidelines, pre-1 July investments must be converted into demat form by 31 October if the investee company is required to facilitate dematerialisation or if the AIF, in collaboration with SEBI-registered entities, exercises control over the company.

Exemptions for Certain AIF Schemes

SEBI has also granted exemptions to schemes of AIFs that are nearing maturity. Schemes whose tenure, excluding permitted extensions, ends on or before 31 October, as well as those already in an extended tenure as of 14 February, are not required to comply with the dematerialisation mandate.

These exemptions aim to reduce regulatory burdens on funds close to their closure while maintaining the broader goal of increased transparency and investor protection.

Conclusion

By extending the timeline and providing exemptions, SEBI ensures a smoother transition to dematerialised investments for AIFs. The move reflects the regulator’s efforts to maintain market integrity while accommodating practical challenges faced by fund managers.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.