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LEGAL NOTICE NO……….

THE CAPITAL MARKETS (COLLECTIVE INVESTMENT SCHEMES)

(ALTERNATIVE INVESTMENT FUNDS) REGULATIONS,

2021

PART I – PRELIMINARY

1. Citation and Commencement

2. Application

3. Interpretation

4. Constitutive Documents

PART II – REGISTRATION OF AIFs

5. Registration of AIFs

6. Eligibility Criteria

7. Furnishing of Information

8. Procedure for Certificate of Registration

9. Conditions for the issue of Certificate of Registration

10. Procedure where registration is denied

PART III INVESTMENT CONDITIONS AND RESTRICTIONS

11. Investment strategy

12. Investment in a AIFs

13. Placement Memorandum

14. Capital Raising

15. Tenure

16. General Investment Conditions

17. Conditions for investment in asset classes

PART IV – GENERAL OBLIGATIONS AND RESPONSIBILITIES AND

TRANSPARENCY

18. General Obligations

19. Conflict of Interest

20. Transparency

21. Valuation

22. Obligations of Manager

23. Maintenance of Record

24. Submission of Report to the Authority

25. Winding up

PART V - INSPECTION

26. Authority’s right to inspect

27. Notice before Inspection

28. Obligations of alternative Investment Funds on Inspection

29. Submission of Report to the Authority

30. Communication of finding etc. to the fund manager and the AIF

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PART VI – PROCEDURE FOR ACTION IN CASE OF DEFAULT

31. Liability for action in case of Default

32. Liability for loss

PART VII – TEMPORARY EXEMPTION FROM OPERATION OF THE

REGULATIONS

PART VIII – MISCELLANEOUS

SCHEDULES

SCHEDULE I - General information

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THE CAPITAL MARKETS ACT

(Cap. 485A)

IN EXERCISE of the powers conferred by Section 12(1)(f) of the Capital Markets Act,

the Capital Markets Authority makes the following Regulations -

THE CAPITAL MARKETS (COLLECTIVE INVESTMENT SCHEMES)

(ALTERNATIVE INVESTMENT FUNDS) REGULATIONS,

2021

PART I – PRELIMINARY

Citation and

Commencement 1. This Instrument may be cited as the Capital Markets (Collective

Investment Schemes) (Alternative Investment Funds) Regulations,

2021.

Application 2. These Regulations apply to licensed AIF fund managers and

alternative investment funds constituted under the laws of Kenya and

the alternative investment funds that are recognized under the Act

Interpretation 3.

(1) In these Regulations, unless the context otherwise requires—

“Act” means Capital Markets Act, Cap 485A;

“alternative investment fund” or “AIF” means a collective

investment scheme in whatever legal form established in Kenya

(including a trust, a corporate body or a limited liability

partnership as approved by the Authority), which is a privately

pooled investment vehicle which collects funds from two or more

investors, whether from Kenya or outside of Kenya, in order to

invest it in accordance with a defined investment policy approved

by the Authority for the benefit of its investors

Provided that the following shall not be considered alternative

investment funds for the purposes of these Regulations:

(a) family trusts;

(b) employee participation scheme or employee savings scheme;

(c) a retirement fund;

(d) a holding company; and a securitisation special purpose

vehicle

“associate” includes:

(a) any person who directly or indirectly controls, beneficially

owns or holds ten (10) percent or more of the paid up capital of

the fund manager, the trustee or depositary;

(b) any member of a group of which persons specified in sub-

paragraph (a) forms part of; or

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(c) any director or Key Executives of the fund manager, trustee or

depositary as the case may be, or any of their associates as

specified in sub-paragraphs (a) and (b)

“applicant” means, depending on the structure of the AIF, the AIF

itself or the manager;

“Authority” means the Capital Markets Authority established by

the Act;

“change in control” in relation to a fund manager means change in

the controlling interest or change in legal form;

“company” means a company incorporated under the

Companies Act, Cap 486;

“Conduct of Business Regulations” means the Capital Markets

(Conduct of Business) (Market Intermediaries) Regulations,

2011

“constitutive documents” means:

(a) in relation to an AIF constituted as a body corporate, the

memorandum and articles of incorporation;

(b) in relation to an AIF constituted as a trust, the trust deed and

any supplemental deed thereto;

(c) in relation to an AIF constituted as limited liability

partnership or common contractual fund, the partnership deed

or contractual agreement; and

(d) in relation to any other AIF, such documents as may be directed

by the Authority;

“Corporate Governance Regulations” means the Capital Markets

(Corporate Governance) (Market Intermediaries) Regulations

2011

“debt fund” means an AIF which invests primarily in debt or debt

securities of listed or unlisted investee companies according to

the stated objectives of the AIF;

“depositary” in relation to an AIF constituted otherwise than as a

trust the person with whom that the property of that AIF is

entrusted for safekeeping;

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“equity linked instruments” includes instruments convertible into

equity shares or share warrants, preference shares, debentures

compulsorily or optionally convertible into equity;

“fund manager” has the same meaning as “manager”;

“fund property” means the property of the AIF;

“hedge fund” means an AIF which employs diverse or complex

trading strategies and invests and trades in securities having

diverse risks or complex products including listed and unlisted

derivatives;

“infrastructure fund” means an AIF which invests primarily in

unlisted securities or partnership interest or listed debt or

securitized debt instruments of investee companies or special

purpose vehicles engaged in or formed for the purpose of

operating, developing or holding infrastructure projects;

“investee” or “investee company” means an enterprise, company,

special purpose vehicle or limited liability partnership or body

corporate in which an AIF may invest;

“investible funds” means capital raised through the issuance of

participatory interests and retained earnings;

“Inspecting Authority” mean the person appointed or nominated

to carry out an inspection under Regulation 28

“investor” means a participant or holder;

“Key Executives” includes the chief executive officer, chief

financial officer, chief investment officer, chief accounting

officer, chief operating officer, company secretary, internal

auditor and the compliance officer irrespective of their

designation;

“leverage” means any method by which an operator increases

the exposure of AIF it manages whether through borrowing of

cash or securities or leverage embedded in a derivative

position or by any other means;

“Licensing Regulations’ means the Capital Markets

(Licensing Requirements) (General) Regulations, 2002;

“manager” means

(a) the person assigned the management function in an AIF

which is self-managed; and

(b) any person or entity, external to the AIF by whatever name

called who is appointed to manage the AIFs business and

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affairs and may also include the sponsor or creator of the

fund;

“participant” means the holder of a participatory interest;

“participatory interest” means any interest or share in an AIF,

undivided or otherwise, whether called a participatory, share, unit

or by any other name;

“placement memorandum” means the information document

utilized for the purposes of the private placement of

participatory interests in an AIF;

“sale” in relation to participatory interests (except where the

context otherwise requires) means the sale or placement of

participatory interests by the manager as a principal or

otherwise;

“scheme” means AIF;

“scheme property” means the property of the AIF;

“shareholder” means a participant;

“SME” means Small and Medium Enterprise;

“SME fund” means an AIF which invests primarily in unlisted

securities of investee companies which are SMEs or securities of

those SMEs which are listed or proposed to be listed on a,

investment exchange;

“trust deed” means the deed constituting the AIF as a trust and any

deed expressed to be supplemental to it made between the fund

manager and the trustee.;

“trustee” means the person holding title to the property of an AIF

constituted as a trust;

Constitutive

documents 4. (1) An AIF does not qualify to be licensed unless its constitutive

documents conform with Schedule 1 to these Regulations:

(2) Any power conferred on the fund manager, trustee and/or

depositary in these Regulations is subject to any express prohibition

contained in the constitutive documents.

(3) The constitutive documents must not include any provision, which

is unfairly prejudicial to the interests participants generally, or to the holders

of any class of participants.

PART II – REGISTRATION OF AIFs

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Registration of

AIFs 5.

(1) On and from the commencement of these Regulations, no

entity or person shall operate or hold itself out as an AIF unless it has

applied for and obtained a certificate of registration from the Authority:

Provided that an existing fund falling within the definition of AIF which

is not registered with the Authority may continue to operate for a period

of six months from commencement of these Regulations or if it has made

an application for registration under this Regulation within the said period

of six months, till the determination of such application

(2) Any entity referred to in sub-regulation (1) which fails to

make an application for registration under these Regulations within the

period specified shall cease to carry on any activity as an AIF.

(3) A fund manager may seek to register an AIF which may

invest in any one or more of the following assets classes:

(a) debt funds;

(b) equity and equity linked investments;

(c) hedge funds;

(d) infrastructure funds; and

whether or not they employ diverse or complex trading strategies

including leverage through investment in listed or unlisted derivatives.

(4) An application for registration for any of the asset classes

specified in sub-regulation (3) shall be in such form as may be specified

by the Authority and shall be accompanied by the non-refundable

application fee specified by the Authority from time to time.

(5) The Authority shall take into account requirements as specified

in these Regulations for the purpose of considering the grant of

registration.

(6) Without prejudice to the powers of the Authority to take any

action under the Act or these Regulations, the certificate of registration

shall be valid till the AIF is wound up.

(7) The Authority may, in the interest of the investors, issue

directions with regard to the transfer of records, documents or securities

or disposal of investments relating to the activities as an AIF.

(8) The Authority may, in order to protect the interests of investors,

appoint any person to take charge of records, documents, securities and

for this purpose, also determine the terms and conditions of such an

appointment.

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Eligibility

criteria 6.

(1) For the purposes of the grant of a certificate of

registration to an AIF under Regulation 8, the Authority shall consider

the following conditions for eligibility, namely whether, —

(a) the constitutive documents of the AIF demonstrate, inter alia, its

authority or power to carry on the activity of an AIF;

(b) the AIF is prohibited by its constitutive documents from making

an invitation to the public to subscribe to its securities;

(c) the directors of the Applicant are fit and proper persons based on

the criteria specified in the Licensing Regulations as applicable;

(d) the key investment team of the fund manager has adequate

experience, with at least one key personnel having not less than five

years’ experience in:

(i) advising or managing pools of capital;

(ii) fund or asset or wealth or portfolio management;

(iii) the business of buying, selling and dealing of securities

or other financial assets and has relevant professional

qualifications;

(e) the fund manager has the necessary infrastructure and human

resources to effectively discharge its activities;

(f) the fund manager has on behalf of the AIF clearly described at

the time of registration:

(i) the investment objective;

(ii) the targeted investor;

(iii) proposed scheme assets;

(iv) investment policy or strategy; and

(v) proposed tenure of the AIF.

(g) Whether the Applicant or any entity established by the fund

manager has previously been denied registration by the Authority.

Furnishing of

information 7.

(1) The Authority may require the applicant to furnish any such

further information or clarification regarding the manager or nature of

the AIF or fund management activities or any such matter connected

therewith to consider the application for grant of a certificate before or

after registration thereon.

(2) Should the Authority require, the applicant or manager shall

appear before the Authority to make representations.

Procedure for

certificate of

registration

8.

(1) The Authority may grant a certificate of registration to an AIF

for any specific asset classes in sub-regulation 4(3), if it is satisfied

that the fund manager and the AIF fulfil the requirements as

specified in these Regulations.

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(2) The Authority shall, (on receipt of the specified registration

fee grant a certificate of registration for an AIF.

(3) The registration may be granted with such conditions as may

be deemed appropriate by the Authority.

(4) The Authority may, on being satisfied that the Applicant

complies with the provisions of Regulation 5 except those of clause

(c) or clause (d) thereof, as the case may be, grant an in-principle

approval for registration of the AIF.

Provided that the applicant shall comply with clause (c) or clause

(d) of Regulation 5, as the case may be, within six months from the

date of grant of in-principle approval and upon compliance with the

same, the Authority may grant a certificate of registration under

sub-regulation (2).

(5) An AIF that has been granted in-principle approval under sub-

paragraph (4) may accept commitments from investors but shall

not accept any monies until it is granted registration under sub-

regulation (2) of this Regulation.

Conditions for

the issue of

certificate of

registration

9.

(1) The certificate granted under Regulation 8 shall, inter-alia, be

subject to the conditions that the fund manager and the AIF:-

(a) shall abide by the provisions of the Act and these

Regulations;

(b) shall not carry on any activity other than permitted

activities;

(c) shall forthwith inform the Authority in writing, if any

information or particulars previously submitted to the

Authority are found to be false or misleading in any

material particular or if there is any material change

in the information already submitted.

(2) An AIF which has been granted registration for (a) specific assets

class(es) cannot change such asset class(es) subsequent to registration,

except with the approval of the Authority.

Procedure

where

registration is

denied.

10. (1) After considering an application made under Regulation 4, if the

Authority is of the opinion that a certificate should not be granted, it

may reject the application after giving the applicant a reasonable

opportunity of being heard.

(2) The decision of the Authority to reject the application shall be

communicated to the applicant within thirty days.

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(3) Where an application for a certificate of registration for an AIF is

rejected by the Authority, the applicant shall ensure that the AIF

ceases or does not commence any activities for which an AIF is

required to be registered in terms of these Regulations :

Provided that nothing contained in these Regulations shall affect the

liability of the Applicant and the AIF, where applicable, towards its

existing investors under law or agreement.

PART III INVESTMENT CONDITIONS AND RESTRICTIONS

Investment

strategy 11.

(1) For each AIF that it manages the fund manager shall ensure that:

(a) The AIF state its investment strategy, investment purpose and

investment methodology in its placement memorandum to the

investors;

(b) Any material alteration to the AIF’s strategy shall be made

with the consent of at least two-thirds of holders participatory

interests by value of their investment in the AIF.

Investment in a

AIF 12.

(1) Investment in all asset classes shall be subject to the following

investment conditions:

(a) the AIF may raise funds from any investor wherever

resident by way of issue of participatory units;

(b) each AIF shall have scheme assets of at least KSh10

million;

(c) the AIF shall not accept from an investor, an investment

of value less than KSh1million:

(d) the manager, where applicable, shall have a continuing

interest in the AIF of not less than (two and half percent

of the scheme property or KSh1 million, whichever is

lower, in the form of investment in the AIF and such

interest shall not be through the waiver of management

fees;

(e ) the manager shall disclose its investment in the AIF to

the investors of the AIF;

(f) no AIF shall have more than 20 investors;

Provided that the provisions of the Companies Act shall apply

to an AIF formed as a company.

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(h) the AIF shall not solicit or collect funds except by way

of private placement.

Placement

memorandum 13.

(1) An AIF fund shall raise funds through private placement by

issue of a placement memorandum, by whatever name called;

(2) Such placement memorandum as specified in sub-regulation

(1) shall contain:

(a) all material information about the AIF and the fund

manager or management capacity in the case of a self-

managed AIF;

(b) background of the key investment team of the fund

manager;

(c) targeted investors;

(d) fees and all other expenses proposed to be charged,

duration of the AIF;

(e) conditions or limits on redemption;

(f) investment strategy;

(g) risk management tools and parameters employed;

(h) key service providers;

(i) conflict of interest and procedures to identify and

address them;

(j) disciplinary history;

(k) the terms and conditions on which the operator offers

investment services;

(l) its affiliations with other intermediaries;

(m) manner of winding up of the AIF; and

(n) such other information as may be necessary for an

investor to take an informed decision on whether to

invest in the AIF.

Capital raising 14.

(1) The AIF may raise capital from investors subject to filing of

placement memorandum with the Authority.

(2) Such placement memorandum shall be filed with the

Authority at least thirty days prior to launch of AIF along with the

fees as specified in (the Second Schedule).

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(3) The Authority may by notice in writing, require the fund

manager to furnish to it, within such period as is specified in the

notice, all such information with respect to itself or the AIF as is

specified in the notice.

(4) The Authority may communicate its comments, if any, to the

fund manager prior to the commencement of any capital raising

by the AIF and the fund manager shall incorporate the comments

in the placement memorandum prior to the commencement of the

capital raising.

Tenure 15.

(1) Unless otherwise stated in the constitutive document and

placement memorandum, the tenure of the AIF shall be a

minimum of three years.

(2) Extension of the tenure of the AIF may be permitted up to two

years subject to approval of two-thirds of the holders of

participatory interests by value of their investment in the AIF.

(3) In the absence of the approval referred to in sub-regulation (2)

of the participatory interest holders the AIF shall fully liquidate

within one year following expiration of the stated in sub-

regulation (1) or extended duration thereof.

General

Investment

Conditions

16. (1) Investments by all categories of AIF shall be subject to the

following conditions:-

(a) An AIF may invest in securities of companies incorporated

outside Kenya subject to such conditions that may be

stipulated the Authority from time to time;

(b) Co-investment in an investee company by fund manager

shall not be on terms more favourable than those offered to

the AIF;

(c) No AIF shall invest more than 25 percent of the investable

funds in one investee company;

(d) An AIF shall not invest in associates except with the

approval of 75 percent of participants by value of their

investment in the AIF;

(e) Un-invested portion of the investable funds may be invested

in liquid (collective investment schemes or bank deposits or

other liquid assets of higher quality such as Treasury bills,

Commercial Papers, Certificates of Deposits, etc.) till

deployment of funds as per the investment objective;

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(2) Notwithstanding the conditions as specified in sub-regulation (1),

the Authority may specify additional requirements or criteria for AIF

or for a specific category thereof.

Conditions for

investment in

asset classes

17. (1) Depending on the nature of the asset classes for which an AIF

is registered, the Authority may, in its discretion, impose such

conditions as it deems necessary including:

(a) limitations on borrowing funds directly or indirectly or

engagement in leverage except for meeting temporary

funding requirements, on not more than four occasions in

a year and not more than ten percent of the net asset value

of the AIF;

(b) restriction on the amount that may be invested in unlisted

equity shares or equity linked instruments or companies

listed or proposed to be listed on a SME exchange or SME

segment of an exchange;

(c) restriction in the amount that may be invested in:

(i) preferential allotment, including through

qualified institutional placement, of equity or

equity linked instruments of a listed company

subject to lock in period of one year; or

(ii) the equity shares or equity linked instruments of

a financially weak company or a sick industrial

company whose shares are listed.

(d) engagement in hedging, subject to guidelines as

specified by the Authority from time to time;

(e) regulation of lock-in periods on investments;

(2) Subject to sub-regulation (1) an AIF may from time to time, enter

into an agreement with an investment banker to subscribe to the

unsubscribed portion of an issue or to receive or deliver

securities in the process of market making.

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(3) The imposition of conditions in terms of this Regulation shall be

by way of the issuance of directions in areas including

operational standards, conduct of business rules, prudential

requirements, restrictions on redemption and conflict of interest.

PART IV – GENERAL OBLIGATIONS AND RESPONSIBILITIES AND

TRANSPARENCY

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General

Obligations 18.

(1) All AIFs shall develop and review policies and procedures, and

their implementation, on a regular basis, or as a result of business

developments, to ensure their continued appropriateness.

(2) A fund manager may resign by giving written notice to the

board of directors, partners, trustee or depositary of the AIF and copied

to the Authority stating the reasons for the resignation.

(3) A fund manager shall be removed-

(a) immediately upon the suspension or revocation of its license

by the Authority; or

(b) by at least one month’s notice in writing by the board of

directors, partners, trustee or depositary of the fund giving

reasons for the termination and copied to the Authority.

(4) The fund manager of the AIF shall appoint a trustee or

depositary registered with the Authority for the safekeeping of

property if the scheme property of the AIF is more than KSh1 million.

(5) All AIFs shall inform the Authority in case of material change

from the information provided by the AIF at the time of application

for registration.

(6) In case of change in control of the fund manager, prior approval

from the Authority shall be obtained by the AIF.

(7) The books of accounts of the AIF shall be audited annually by

a qualified auditor.

The fund manager may engage such technical experts as are

reasonably required for the purposes of the AIF and pay for the same

out of the funds of the AIF.

Conflict of

interest 19.

(1) The fund manager of the AIF shall act in a fiduciary capacity

towards its investors and shall disclose to the investors, all conflicts of

interests as and when they arise or seem likely to arise.

(2) The fund manager shall establish and implement written policies

and procedures to identify, monitor and appropriately mitigate conflicts

of interest throughout the scope of business.

(3) The fund manages of the AIF shall abide by high level principles

on avoidance of conflicts of interest with associated persons, as may be

specified by the Authority from time to time.

Transparency 20.

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(1) For all AIFs that it manages, the fund manager shall ensure that

there is transparency and disclosure of information to investors on the

following:

(a) financial, risk management, operational, portfolio, and

transactional information regarding fund investments shall be

disclosed periodically to the investors;

(b) any fees ascribed to the fund manager and any fees charged to

the AIF or any investee company by an associate of the fund

manager shall be disclosed periodically to the investors;

(c) any inquiries or legal actions by legal or regulatory bodies in

Kenya;

(d) any material liability arising during the AIF’s duration or

tenure shall be disclosed, as and when occurred;

(e) any breach of a provision of the placement memorandum or

agreement made with an investor or any other scheme or

constitutive documents, if any, as and when occurred;

(f) change in control of the fund manager or investee company.

(g) For all AIFs that it manages, the fund manager shall ensure that

quarterly reports are provided to investors which include the

following information, as may be applicable to the AIF:-

(i) financial information of investee companies.

(ii) material risks and how they are managed which may

include:

(aa) concentration risk at fund level;

(bb) foreign exchange risk at fund level;

(cc) leverage risk at fund and investee

company levels;

(dd) realization risk (i.e. change in exit

environment) at fund and investee

company levels;

(ee) strategy risk (i.e. change in or divergence

from business strategy) at investee

company level;

(ff) reputation risk at investee company level;

(gg) extra-financial risks, including

environmental, social and corporate

governance risks, at fund and investee

company level;

(hh) any significant change in the key

investment team; and information on

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systemic risk (including the identification,

analysis and mitigation of systemic risks). Valuation 21.

(1) The AIF shall provide to its investors, a description of its

valuation procedure and of the methodology for valuing assets.

(2) AIFs shall undertake valuations of their investments, at least

once in every six months, by an independent valuer appointed by

the AIF.

(3) AIFs shall ensure that the calculation of the net asset value

(NAV) is independent from the fund management function of the

AIF and such NAV shall be disclosed to the investors at intervals

not longer than a quarter.

Obligations of a

Manager 22.

(1) It shall be the primary responsibility of the Manager, whether

external or internal to the AIF to ensure that the AIF complies with

its duties and obligations in terms of the Act and these Regulations.

(2) The manager shall be obliged to:

(a) address all investor complaints;

(b) provide to the Authority any information sought by it;

(c) maintain all records as may be specified by the Authority;

(d) take all steps to address conflict of interest as specified in

these Regulations;

(e) ensure transparency and disclosure as specified in the

Regulations.

Maintenance of

Record

23. (1) The manager shall be required to maintain the following records

describing:

(a) the assets under the AIF;

(b) valuation policies and practices;

(c) investment strategies;

(d) particulars of investors and their contribution;

(e) rationale for investments made.

(2) The records under sub-regulation (1) shall be maintained for a

period of seven years after the winding up of the AIF.

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Submission of

report to the

Authority

24. (1) The Authority may at any time call upon the AIF to file such

reports, as it may require, with respect to the activities carried on by

the AIF.

Winding up 25.

(1) An AIF set up as a trust shall be wound up:

(a) when the tenure of the AIF or all schemes launched by the

AIF, as mentioned in the placement memorandum is over;

or

(b) if it is the opinion of the manager or trustee, as the case

may be, that the AIF be wound up in the interests of

holders of participatory interests; or

(c) if seventy five percent of the investors by value of their

investment in the AIF pass a resolution at a meeting of

holders of participatory interests that the AIF be wound

up; or

(d) if the Authority so directs in the interests of investors.

(2) An AIF set up as a limited liability partnership shall be wound

up:

(a) when the tenure of the AIF or all schemes launched by the

AIF, as mentioned in the placement memorandum is over;

or

(b) if participants decide, in accordance with the provisions of

the constitutive documents that the AIF be wound up; or

(c) if the Authority so directs in the interests of investors.

(3) An AIF set up as a company shall be wound up in

accordance with the provisions of the Companies Act, 2015

(4) The fund manager, trustees or depositary of the AIF, as the

case maybe, shall advise the Authority and investors of the

circumstances leading to the winding up of the AIF.

(5) On and from the date of advice under sub-regulation (4) no

further investments shall be made on behalf of the AIF so wound

up.

(6) Within one year from the date of the advice under sub-

regulation (4), the assets of the AIF shall be liquidated, and the

proceeds accruing to investors in the AIF shall be distributed to

them after satisfying all liabilities.

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(7) Notwithstanding anything contained in sub-regulation (6) and

subject to the conditions, if any, contained in the placement

memorandum or contribution agreement or subscription agreement,

as the case may be, in specie distribution of assets of the AIF, shall

be made by the AIF at any time, including on winding up of the

AIF, as per the preference of investors, after:

(a) obtaining the approval of at least 75 percent of the

investors by value of their investment in the AIF; or

(b) complying with the provisions of the partnership deed

as the case may be.

(8) Upon winding up of the AIF, the certificate of registration shall

be surrendered to the Authority.

PART V - INSPECTION

Authority’s

right to inspect 26.

The Authority may on notice as set out in Regulation 27 (1) and

subject to Regulation 27(2) carry out an inspection for cause of any

aspect of the business of the AIF

Notice before

inspection 27.

(1) Before ordering an inspection under Regulation 26, the Authority

Board shall give not less than ten days notice to the AIF.

(2) Notwithstanding anything contained in sub-regulation (1) where

the Authority is satisfied that in the interest of the investors no such notice

should be given, it may by an order in writing direct that the inspection

of the affairs of the AIF be taken up without such notice.

(3) During the course of an inspection, the AIF against whom the

inspection is being carried out shall be bound to discharge its obligations

as provided in Regulation 28.

Obligation of

Alternative

Investment

Funds on

Inspection

28. (1) It shall be the duty of:

(a) the fund manager and the AIF in respect of whom an

inspection has been ordered under Regulation 26; and

(b) any other associated person who is in possession of

relevant information pertaining to conduct and affairs of

such AIF including the manager

to produce and furnish to the Inspecting Authority such

books, accounts and other documents in his or her custody

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or control as the Inspecting Authority may require for the

purposes of inspection.

(2) It shall be the duty of the fund manager and AIF and any other

associated person who is in possession of relevant information

pertaining to the conduct and affairs of the AIF and the manager to

give to the Inspecting Authority all such assistance and co-operation

as may be required in connection with the inspection including

furnishing such information as sought by the Inspecting Authority in

connection with the inspection.

(3) The Inspecting Authority shall, for the purposes of inspection,

have power to examine on oath and record the statement of:

(a) any persons responsible for or connected with the

activities of AIF; or

(b) any other associated person having relevant information

pertaining to such AIF.

(4) The Inspecting Authority shall, for the purposes of inspection,

have power to obtain authenticated copies of documents, books,

accounts of the fund manager and AIF, from any person having

control or custody of such documents, books or accounts.

Submission of

reports to the

Authority

29. (1) The Inspecting Authority shall, as soon as possible, on

completion of the inspection submit an inspection report to the

Authority:

Provided that if directed to do so by the Authority Board, he may

submit an interim report.

Communication

of findings etc.

to the Fund

Manager and

AIF

30. (1) The Authority may after consideration of the inspection report and

after giving reasonable opportunity of hearing to the AIF (or its trustees or

depositary) or fund manager, issue such direction as it deems fit in the

interest of (securities) market or the investors including directions in the

nature of;

(a) requiring an AIF not to launch new schemes or raise money

from investors for a particular period;

(b) prohibiting the person concerned from disposing of any of

the properties of the fund or scheme acquired in violation of

these Regulations;

(c) requiring the person concerned to dispose of the assets of the

fund or scheme in a manner as may be specified in the

directions;

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(d) requiring the person concerned to refund any money or the

assets to the concerned investors along with the requisite

interest or otherwise, collected under the AIF;

(e) prohibiting the person concerned from operating in the capital

market or from accessing the capital market for a specified

period.

PART VI – PROCEDURE FOR ACTION IN CASE OF DEFAULT

Liability for

action in case of

default

31.

(1) An AIF which

(a) contravenes any of the provisions of the Act or these

Regulations;

(b) fails to furnish any information relating to its activity as an

AIF as required by the Authority;

(c)furnishes to the Authority information which is false or

misleading in any material particular;

(d) does not submit periodic returns or reports as required by the

Authority;

(e) does not co-operate in any enquiry, inspection or

investigation conducted by the Authority;

(f) fails to resolve the complaints of investors or fails to give a

satisfactory reply to the Authority in this behalf,

shall be dealt with in the manner provided under the Act.

Liability for loss 32.

(1) Any person, including the fund manager who contravenes or fails

to comply with any provision of the Act, the Licensing Regulations,

Conduct of Business Regulations, Corporate Governance Regulations

or these Regulations shall be liable to any other person for loss or

damage suffered by that person as a result of such contravention or

failure.

(2) The normal defences applying to an action for damages in respect

of a statutory duty are available to any defendant in an action

contemplated in sub-regulation (1)

PART VII – TEMPORARY EXEMPTION FROM OPERATION OF THE

REGULATIONS

21

Exemption

from

enforcement in

special cases

33.

(1) The Authority may, exempt any person or class of persons from

the operation of all or any of the provisions of these Regulations for a

period as may be specified but not exceeding twelve months, for

furthering innovation in technological aspects relating to testing new

products, processes, services, business models, etc. in live

environment of regulatory sandbox in the securities markets.

(2) Any exemption granted by the Authority under sub-regulation

(1) shall be subject to the Applicant satisfying such conditions as may

be specified by the Authority including conditions to be complied with

on a continuous basis.

PART VIII – MISCELLANEOUS

Powers of the

Authority to

issue

clarifications

34. In order to remove any difficulties in the application or

interpretation of these Regulations, the Authority may issue clarifications

and guidelines in the form of circulars or issue separate circular,

guidelines, or frameworks for investments in different asset classes.

Delegation of

powers 35. The powers exercisable by the Authority under these Regulations

shall also be exercisable by any officer of the Authority to whom such

powers are delegated by the Authority by means of any competent procedure

under the Act.

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SCHEDULE I - GENERAL INFORMATION

EACH APPLICATION FOR REGISTRATION OF AN AIF SHALL BE

ACCOMPANIED BY THE INFORMATION INDICATED BELOW. AS RELEVANT:

1. GENERAL INFORMATION

a) Name, address of the registered office, address for correspondence and principal place

of business, telephone number(s), fax number(s), e-mail address of the applicant.

b) Name, direct line number, mobile number and e-mail of the contact person(s).

c) Legal structure of applicant - Whether the applicant is a company or trust or limited

liability partnership or a body corporate.

d) Date and place of incorporation/ establishment.

e) Asset classes for which registration of the AIF is applied (f)

f) Whether the applicant or its associates is/ are registered with the Authority or any other

regulatory authority in any capacity along with the details of its registration.

g) Details of infrastructure for conducting activities as an AIF

h) Copy of the draft placement memorandum.

2. DETAILS OF AIF

I. AIF is a Trust:

a) Written submission on the activities of the applicant;

b) Constitutive documents to be attached;

c) State whether the Trust Deed permits the carrying on of the activity of an AIF ;

d) State whether the applicant is prohibited by its trust deed from making an invitation to

the public to subscribe to its participatory interests;

e) Provide details of Trustee and copy of the proposed contract between the manager and

the trustee as required in terms of these Regulations;

II. AIF is a corporate body:

a) Written submission on the activities of the applicant

b) Shareholding structure and profile of the directors (Enclose Identity proof and address

proof of the directors)

c) Constitutive documents to be attached

d) Whether the constitutive documents

e) State whether the constitutive documents permit carrying on of the activity of an

f) AIF (Enclose relevant extract of the Memorandum of incorporation)

g) Whether the applicant is prohibited by its Memorandum of incorporation from making

an invitation to the public to subscribe to its securities;

h) Provide details of depositary and copy of the proposed contract between the AIF and

the depositary as required in terms of these Regulations

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III. AIF is a limited liability partnership:

a) Written submission on the activities of the applicant

b) Beneficial ownership structure and profile of the partners (Enclose Identity proof and

address proof of the partners)

c) Attach copy of the partnership agreement/deed;

d) Whether the applicant is prohibited by its partnership deed from making an invitation

to the public to subscribe to its securities;

e) Provide details of trustee and a copy of the proposed contract between the AIF and the

trustee as required in terms of these Regulations.

4. DETAILS OF FUND MANAGER

a) Name, address of the registered office address for correspondence, telephone

number(s), fax number(s), of the manager.

b) Name, direct line number, mobile number and e-mail of the contact person(s).

c) Legal status of the manager and date and place of incorporation/ establishment,

wherever applicable.

d) Written submission on the activities of the manager including past experience in

establishing and/or advising or managing pools of capital or in fund or asset or wealth

or portfolio management or in the business of buying, selling & dealing of securities or

other financial assets.

e) Identity proof and address proof of directors of manager (if the manager is a company)/

partners of the general partner (if the AIF is a limited liability partnership).

f) In case of fund manager or general partner in a limited liability partnership being a

company, shareholding/ownership structure and profile of the directors.

g) Brief profile of key investment team including experience and professional

qualification

h) Copies of the financial statements for the previous financial year

i) Whether, the fund manager has previously managed/advised any AIFs, which are

registered with the Authority. If affirmative, details of the same.

5. DETAILS OF BUSINESS PLAN AND INVESTMENT STRATEGY

a) Investment objective and investment style/ strategy of the AIF.

b) The target investors

c) The target industries/ sectors, if any

d) Proposed scheme assets

e) Proposed fees to the fund manager

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f) Tenure/duration of the AIF or scheme

g) Details of proposed use of leverage

6. DETAILS OF REGULATORY ACTION TAKEN IN THE PAST, IF ANY

a) Whether the fund manager, trustee or depositary or any of their associates are or were

involved in any litigation connected with the securities market and any order has or had

been passed against them for violation of securities laws. (If affirmative, provide

details. If negative, enclose a declaration to that effect).

b) Whether the fund manager, trustee or depositary or any of their associates:

(i) are or have been involved in any litigation connected with the securities

market which may have an adverse bearing on the business of the AIF for

which registration is applied or;

(ii) any order has or had been passed against them for violation of securities

laws. (If affirmative, provide details. If negative, enclose a declaration to

that effect).

c) Whether the fund manager, trustee or depositary or any of their associates has or have

been refused a certificate by the Authority or its /their certificate has been suspended at

any time prior to this application. (If affirmative, provide details. If negative, enclose a

declaration to that effect).

7. OTHER INFORMATION/DECLARATIONS

a) Amount contributed/ proposed to be contributed by the fund manager along with

details of the same. (Provide copies of commitment letters from the fund manager.

b) Whether the fund manager, trustee or depositary or any of their associates are fit and

proper persons based on the criteria specified in the Licensing Regulations; (Enclose

a declaration to that effect).

c) Declaration that the applicant shall comply with the provisions of these Regulations

with respect to investment in the AIF.

d) Declaration that the applicant shall comply with the provisions of these Regulations

with respect to general investment conditions and conditions for the applicable

category.

DECLARATION STATEMENT (TO BE GIVEN AS BELOW)

We hereby agree and declare that the information supplied in the application, including the

attachment sheets, is complete and true.

AND we further agree that, we shall notify the Authority immediately of any change in the

information provided in the application.

We further agree that we shall comply with, and be bound by the Act and such

guidelines/instructions as may be announced by the Authority from time to time.

25

We further agree that as a condition of registration, we shall abide by such operational

instructions/directives as may be issued by the Authority from time to time.

For and on behalf of____________________________________________________

(Name of the applicant)

Authorized signatory

(Signature)

Made on…………………………………………………………………………, 2021

UKUR YATANI,

Cabinet Secretary for the National Treasury.