Description

SEBI specifies mechanism for monitoring compliance with minimum investment threshold of INR 10 lakh for SIF investors, including freezing and automatic redemption procedures.

Summary

SEBI has specified the mechanism for monitoring compliance with the Minimum Investment Threshold of INR 10 lakh under Specialized Investment Funds (SIF). The circular establishes procedures for handling active breaches, including unit freezing and automatic redemption processes.

Key Points

  • AMCs must monitor compliance with Minimum Investment Threshold on daily basis
  • Active breach occurs when investor’s total investment falls below INR 10 lakh due to investor-initiated transactions
  • Units are frozen for debit when active breach occurs
  • 30 calendar days notice period given to investor to rebalance investments
  • Automatic redemption at next business day NAV if investor fails to rebalance within notice period
  • Applies to aggregate value across all investment strategies of the SIF

Regulatory Changes

The circular clarifies the monitoring mechanism previously outlined in the SIF Circular dated February 27, 2025, providing specific operational procedures for handling minimum investment threshold breaches.

Compliance Requirements

  • AMCs: Monitor daily compliance, freeze units upon breach, issue 30-day notices, execute automatic redemptions
  • RTAs: Implement necessary systems for monitoring and redemption processes
  • Depositories: Put in place systems to support the implementation
  • All entities: Take necessary steps for implementation of the circular provisions

Important Dates

  • Effective Date: July 29, 2025 (immediate effect)
  • Notice Period: 30 calendar days for investor rebalancing
  • Redemption: Next immediate business day after 30th calendar day of notice period

Impact Assessment

This circular provides operational clarity for SIF management and ensures investor protection by preventing dilution of the sophisticated investor base. The automatic redemption mechanism ensures compliance while giving investors opportunity to rectify breaches. The daily monitoring requirement may increase operational burden on AMCs but ensures real-time compliance oversight.

Impact Justification

Establishes critical compliance mechanisms for SIF operations affecting all AMCs and introduces automatic redemption procedures