Ace Lansdowne Investments Services LLP
(1) This has reference to your letter dated April 8, 2021 and subsequent emails dated July 5, 2021 and September 2, 2021, seeking interpretive letter under SEBI (Informal Guidance) Scheme 2003.
(2) In your letter under reference, you have, inter-alia, represented as follows –
(2.1) The Applicant is Manager of Ace Lansdowne Investment Fund (the ALIIF) is a SEBI registered Category – III Alternative Investment Fund (the AIF) having registration No. IN/AIF/18-19/0577 dated September 5, 2018.
(2.2) The Applicant intends to manage an offshore fund which will domiciled in Ireland. The offshore fund would make investments in permissible listed securities of Indian companies through recognized stock exchanges in India. The role of the Manager in managing the offshore fund would be similar to the duties and responsibilities entrusted for managing the Fund.
(3) Further, vide email dated July 5, 2021, you have submitted that the proposed offshore Fund in Ireland will fulfil all the conditions as referred to in Section 9A (3) of the Income Tax Act, 1961 (the IT Act) and will therefore be considered as a eligible investment fund. Vide email dated September 2, 2021, you have also submitted that the Manager is not intending to incorporate any Company or Limited Liability Partnership and the entire team of the Manager shall be responsible fo undertaking investment and divestment activities for the Offshore Fund.
(4) In view of the above, you have sought an interpretive letter under SEBI (Informal Guidance) Scheme 2003, from SEBI on the following:
(4.1) Whether the Applicant which is already acting as the Investment Manager of the SEBI registered Alternate Investment Fund can provide investment management services to the offshore fund?
(4.2) Whether the Investment Manager is required to obtain registration as a Portfolio Manager under SEBI (Portfolio Manager) Regulations 2020, in order to provide investment management services to the offshore fund?
(4.3) Whether the Investment Manager of an AIF is exempt from obtaining registration under SEBI (Portfolio Manager) Regulations 2020, provide investment management services to the offshore fund as its activities are regulated under SEBI (Alternative Investment Fund) Regulations 2012?
(4.4) Whether the Investment Manager of an AIF would be considered as a regulated entity under SEBI (Alternative Investment Fund) Regulations 2012?
Relevant Regulatory Provisions:
(5) In terms of regulation 2(1)(q) of the AIF Regulations “manager” means any person or entity who is appointed by the AIF to manage its investments by whatsoever name called and may also be the same as the sponsor of the Fund.
(6) PMS Regulations define Portfolio Manager, Eligible Investment Fund and Eligible Fund Manager as under
Regulation 2(1)(o) – “portfolio manager' means a body corporate, which pursuant to a contract with the client, advises or directs or undertakes on behalf of a client (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or funds of the client, as the case may be.
Regulation 2(1)(i) – “Eligible Investment Fund” shall have the same meaning as assigned to it in in Section 9A (3) of the Income Tax Act, 1961
Regulation 2(1)(h) – “Eligible Fund Manager” shall have the same meaning as assigned to it in in Section 9A (4) of the Income Tax Act, 1961
(7) In terms of Regulation 18 of the PMS Regulations, an applicant who is a body corporate who intends to act as an eligible fund manager may be granted registration under Regulation 10 if:
(a) It fulfils all the conditions of specified under Section 9A (4) of the Income Tax Act, 1961;
(b) It complies with all conditions specified under Chapter II of these Regulations, unless specified otherwise in this Chapter;
(c) It pays fees as specified under Schedule II; and
(d) It provides a declaration to the Board as specified in paragraph (2) of Schedule VI
(8) Our Comments:
The submissions made in your letter and emails have been considered and our view on the issues raised in your letter / emails are as under:
(8.1) As regards the queries mentioned in 4.1 and 4.2 above, an Investment Manager of SEBI registered AIF can provide investment management services to the offshore fund (i.e. an eligible investment fund as defined under Section 9A (3) of the Income Tax Act, 1961) in Ireland only by obtaining the certificate of registration as a portfolio manager under the PMS Regulations to act as an eligible fund manager.
(8.2) As regards the query mentioned in 4.3 above, the Manager of SEBI registered AIF is not exempted from obtaining registration under the PMS regulations to investment management services to the offshore fund in Ireland. Unlike the SEBI (Investment Advisers) Regulations 2013, the PMS Regulations do not provide for any specific exemptions from registration to any entity and therefore the applicant will have to adhere by the provisions of the PMS Regulations.
(8.3) As regards the query mentioned in 4.4 above, the Manager of an AIF is considered as a regulated entity in terms of AIF Regulations. In this regard, reference is made to the following provisions of the AIF Regulations:
(a) Regulation 4 – Eligibility Criteria
(b) Regulation 5 – Furnishing Information