Section 18 in Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012
18. Conditions for Category III Alternative Investment Funds.
- The following investment conditions shall apply to Category III Alternative Investment Funds:-(a)Category III Alternative Investment Funds may invest in securities of listed or unlisted investee companies or derivatives or complex or structured products;(aa)[ Category III Alternative Investment Funds may deal in goods received in delivery against physical settlement of commodity derivatives;] [Inserted by Notification No. SEBI/LAD-NRO/GN/2019/16, dated 10.5.2019 (w.e.f. 21.5.2012).](b)Fund of Category II Alternative Investment Funds may invest in units of Category I or Category II Alternative Investment Funds:Provided that they invest solely in such units and shall not invest in units of other Fund of Funds.(c)Category III Alternative Investment Funds may engage in leverage or borrow subject to consent from the investors in the fund and subject to a maximum limit, as may be specified by the Board:Provided that such funds shall disclose information regarding the overall level of leverage employed, the level of leverage arising from borrowing of cash, the level of leverage arising from position held in derivatives or in any complex product and the main source of leverage in their fund to the investors and to the Board periodically, as may be specified by the Board.(d)Category III Alternative Investment Funds shall be regulated through issuance of directions regarding areas such as operational standards, conduct of business rules, prudential requirements, restrictions on redemption and conflict of interest as may be specified by the Board.
