SEBI has issued a circular directing managers to ensure that investors in an AIF satisfy certain diligence criteria at the time of being on-boarded as well as at the time of drawing down capital. This is the first time that SEBI has cast a direct obligation in respect of investor diligence of AIFs. This circular could impact fundraising from investors in the UAE and Cayman Islands since these jurisdictions are part of the FATF ‘grey list’.

In this piece, we examine the new investor diligence obligations on AIF managers and analyse some of the operational issues that may arise in respect of fund economics and governance on account of these new obligations.