Sebi modifies framework for valuation of AIFs’ investment portfolio

Markets regulator Sebi on Thursday tweaked the framework for valuing the investment portfolios of Alternative Investment Funds (AIFs) whereby securities — other than unlisted, non-traded, or thinly-traded securities — will now be valued in line with mutual fund rules. This came after the Securities and Exchange Board of India (Sebi) received feedback from the AIF industry on challenges with the valuation framework and has made changes based on public comments and internal discussions.

Modifying the rules, the regulator said, “valuation of securities, other than unlisted securities and listed securities which are non-traded and thinly traded, for which valuation norms have been prescribed under Sebi (Mutual Funds) Regulations shall be carried out as per the norms prescribed under MF rules”.

Further, valuation of thinly-traded and non-traded securities will be harmonized across Sebi-regulated entities by March 31, 2025.

Also, the regulator said changes in valuation methods to comply with these rules will not be considered “material changes,” but must be disclosed to investors.

With regards to independent valuers, Sebi said the framework for independent valuers of AIF portfolios now requires the valuer to be part of a registered entity such as ICAI, ICSI or a CFA charter.

Further, AIFs will now have seven months, as compared to six earlier, to report valuations based on audited data from investee companies. AIF trustees or sponsors are required to ensure that managers include compliance with these rules in their compliance reports. These changes will take effect immediately, Sebi said.