Restrictions on Investment and Corpus of the Scheme

35. (1) In case of an open-ended scheme, the maximum investment in unlisted securities should not exceed twenty-five per cent. (25%) of the corpus of the scheme: Provided that in case of an open-ended fund of funds scheme, this requirement shall not be applicable if such scheme is investing in other open-ended scheme(s) which shall not have investment in unlisted securities in excess of twenty-five per cent. (25%) of their corpus. 19[Provided further that the investments by an open-ended scheme in unlisted securities shall be undertaken only upon achieving the minimum corpus of USD 3 Million.] (2) The minimum size of corpus of the restricted schemes shall be USD 3 Million: Provided that an open-ended scheme may commence investment activities upon raising at least USD 1 Million in funds and shall achieve the minimum corpus of USD 3 Million within 12 months from the date of communication from the Authority that the placement memorandum of the scheme has been taken on record. 20[Provided further that if a FME fails to achieve the minimum size of corpus of USD 3 Million within the specified time period, it shall have the option to extend the validity of the placement memorandum, wherein each such extension shall be for a period of six (6) months starting from the day after the expiry of the existing validity of the placement memorandum, by filing an application at such time when the placement memorandum is still valid, accompanied by a fee equal to-i) for the first extension, twenty-five per cent. (25%) of the applicable fee for filing of a fresh scheme, as may be prevalent at the time of such extension; and ii) for each subsequent extension, fifty per cent. (50%) of the applicable fee for filing of a fresh scheme, as may be prevalent at the time of such extension.] (3) Restricted schemes may invest in its associate subject to the prior approval of seventy-five per cent. (75%) investors in the scheme by value. (4) Restricted schemes shall not buy or sell securities from associates, other schemes of the FME or its associates, or an investor who has committed to invest at least fifty per cent. (50%) of the corpus of the scheme, unless prior approval has been obtained from seventy-five per cent. (75%) investors in the scheme by value: Provided that the voting process shall exclude such investor(s) who have committed to invest at least fifty per cent. (50%) of the corpus of the scheme and is buying or selling the securities, from or to, the scheme: Provided further that such approval from investors may not be required for a fund of funds scheme which has disclosed in its placement memorandum the details of the underlying scheme(s) wherein the investments are intended to be made and the nature of association, if any, that the FME has with the manager(s) of such underlying scheme(s). (5) A Restricted scheme filed with the Authority as a Category I AIF, Category II AIF or Category III AIF shall invest in accordance with such additional conditions as may be specified by the Authority. 21[(6) The FME shall ensure that any differential distribution rights to investors through issuance of senior and junior or subordinate units in a Restricted scheme shall be in accordance with the framework as may be specified by the Authority. Explanation. – “senior units” indicate such class of units which has superior rights over the distribution proceeds of the Restricted scheme, while “junior units” or “subordinate units” indicate such classes of units, including mezzanine units, the rights of which over the distribution proceeds of the scheme would be inferior to that of senior units.]