SEBI has asked PEs & VCs To Confirm On PPM Resolution Framework
The capital market has questioned fund houses to establish their dispute resolution procedures as Venture Capital (VC). Private Equity (PE) managers pursue smart money, contend with investors’ grievances, and tackle the blows from disappointing Initial Public Offering (IPO) listings and variability in a few of the marquee start-ups they have invested in.
India’s securities and commodity market regulatory body, the Securities and Exchange Board of India (SEBI), has also questioned several funds to verify if they have outlined the Private Placement Memorandum, or PPM’s, resolution framework. It is a crucial legal document that wealthy investors carefully review before investing in an Alternative Investment Fund, or AIF, and contains details on risk management and investment strategies. The legal designation for angel investments, Venture Capital, and Private Equity is Alternative Investment Fund. According to a source, the funds must submit the details by the 13th of October.
Investors frequently complain to administrators and fund managers about substandard performance, failure to receive statements, the secrecy of certain details, exit time, inadequate Initial Public Offering (IPO) listing of start-ups, and the reasoning behind a few of the investments, among other issues. The regulatory body has likely noticed an increase in the complaints made by investors.
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According to Suneet Barve, who is the founder of SSB Legal, the mandated model of SEBI for Private Placement Memorandum (PPM) still needs the Alternative Investment Fund (AIF) to unfold the dispute resolution procedure it has implemented as well as SCORES information, as called for by Regulation 25 of the AIF Regulations. Suppose such AIFs failed to include these facts in their PPMs. In that case, the problem looks particularly pertinent for AIFs operating before the PPM template of SEBI was established in February 2020.
As per the regulatory body’s regulations for Alternative Investment Funds, an AIF must establish the process for resolving disputes among the AIF investors, manager, or even sponsor using arbitration/negotiation or any other method that has been mutually agreed upon by the parties involved.
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