Section 17 in Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012
17. Conditions for Category II Alternative Investment Funds.
- The following investment conditions shall apply to Category II Alternative Investment Funds:-(a)Category II Alternative Investment Funds shall invest primarily in unlisted investee companies or in units of other Alternative Investment Funds as may be specified in the placement memorandum;(b)Fund of Category II Alternative Investment Funds may invest in units of Category I or Category II Alternative Investment Funds:Provided that they shall only invest in such units and shall not invest in units of other Fund of Funds.(c)Category II Alternative Investment Funds may not borrow funds directly or indirectly and shall not engage in leverage except for meeting temporary funding requirements for not more than thirty days, not more than four occasions in a year and not more than ten percent of the corpus;(d)Notwithstanding clause (c), Category II Alternative Investment Funds may engage in hedging, subject to guidelines as specified by the Board from time to time;(e)Category II Alternative Investment Funds may enter into an agreement with merchant banker to subscribe to the unsubscribed portion of the issue or to receive or deliver securities in the process of market making under Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.(f)Category II Alternative Investment Funds shall be exempt from regulation 3 and 3A of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 in respect of investment in companies listed on SME Exchange or SME segment of an exchange pursuant to due diligence of such companies subject to the following conditions:(i)the fund shall disclose any acquisition or dealing in securities pursuant to such due-diligence, within two working days of such acquisition or dealing, to the stock exchanges where the investee company is listed;(ii)such investment shall be locked in for a period of one year from the date of investment.
