- SEBI issues guidelines for calculation of concentration norms for Cat III AIFs | Product specifications issued for EGR segment/Gold Exchange
Pursuant to its previous circulars, SEBI has specified guidelines in respect of the following:
A. Calculation of investment concentration norm for Category III Alternative Investment Funds (Cat III AIFs):
Pursuant to the recent amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations) providing flexibility to Category-III AIFs – to calculate investment concentration norms based either on investable funds or net asset value (NAV) while investing in listed equity of an investee company – SEBI has specified certain requirements for the calculation of investment norms. This would require Category-III AIFs to seek approval of their trustees or board of directors or designated partners, as the case may be, and inform the same to their investors within 30 days from the date of the issuance of the SEBI circular.
B. Product Specifications pertaining to Electronic Gold Receipt (EGR) Segment in India:
In furtherance of the framework notified by SEBI for operationalizing the gold exchange in India, SEBI has issued certain guidelines to be followed by stock exchanges for the launch of contracts with different denomination for trading and/ or conversion of EGR into gold.
The aforementioned changes are analyzed below:
A. Calculation of investment concentration norm for Category III AIFs
As you are aware, SEBI recently amended the general investment conditions for Cat III AIFs under the AIF Regulations vide notification dated March 16, 2022 (available here). This inter alia provides flexibility to Cat III AIFs, including large value funds for accredited investors of Cat III AIFs, to calculate investment concentration norm based either on investable funds or NAV of the scheme while investing in listed equity of an investee company.
Pursuant to the aforementioned amendment, SEBI has specified the following in this regard:
The above clarifications have been issued vide SEBI circular dated March 28, 2022 (available here).
B. Product Specifications pertaining to EGR Segment in India
Vide Circular no. SEBI/HO/CDMRD/DMP/CIR/P/2022/07 dated January 10, 2022 (available here) (January 10 Circular), SEBI had issued a framework operationalizing the gold exchange in India as per which inter alia the entire transaction in the EGR segment has been divided into three tranches:
Further, SEBI, vide Circular no. SEBI/HO/CDMRD/DMP/P/CIR/2022/19 dated February 14, 2022 (available here) (February 14 Circular), issued standard operating guidelines for the vault managers and depositories in the EGR segment.
In furtherance of the above, SEBI has specified the following guidelines for stock exchanges in respect of the launch of contracts with different denomination for trading and / or conversion of EGR into gold:
|Deposit of gold in the ‘deposit unit’ with registered vault managers||Any person desirous of dealing in EGR on the stock exchange shall deposit the gold with the registered Vault Managers, in the ‘deposit unit’, which shall be specified by the stock exchanges.|
|Trading to take place in the ‘trading unit’ of the stock exchanges | ‘Settlement unit’ same as ‘trading unit’ | Trading Unit of EGR to be specified to vault manager||
|Procedure to obtain physical gold against EGRs | ‘Withdrawal unit’ of EGRs same as the ‘deposit unit’||Beneficial owner of EGR intending to obtain physical gold against the EGR/s, shall follow the procedure as stated in January 10 Circular. The ‘withdrawal unit’ of EGR shall be same as ‘deposit unit’, which shall be specified by the stock exchanges.|
|ISINs of EGRs to contain details of deposit unit and trading unit||In addition to ISIN norms specified in Annexure 2 of the February 14 Circular, the ISINs of EGRs shall also contain details of deposit unit and trading unit, for the purpose of easy identification by the investors.|
|Dissemination of adequate information to investors | Details of units to be spelt out in contract specifications||
The above guidelines have been specified by SEBI vide circular dated March 28, 2022 (available here).