MUMBAI, 14 JUNE, 2020 (GPN): In order to ensure compliance with the Private Placement Memorandum (PPM), SEBI had vide its circular dated
5 February, 2020 prescribed an annual audit. The findings of the audit along with any corrective steps are
required to be communicated to the Trustee, the Manager and SEBI. The audit is not required for angel funds
and AIFs / Schemes with minimum commitment of INR 70 crore from each investor, subject to obtaining a
waiver from the investors in the prescribed form.
SEBI has clarified vide circular dated 12 June, 2020 that the finding of audit of compliance with PPM needs to
be submitted within 6 months from the end of the financial year. However for the financial year 2019-20, the
audit report needs to be submitted by 31 December, 2020. Further, the audit need not be conducted for AIFs
which have not raised any funds from their investors. Such AIFs need to submit a certificate from a Chartered
Accountant to the effect that no funds have been raised.
For the year ended 31 March 2020 SEBI has thus granted much needed additional time till 31 December 2020
keeping in view the current situation. The exact scope of the audit would depend on the PPM terms but broadly
is likely to cover the review of the following terms of the PPM:

• Investment objective, strategy and process
• Fund/ Scheme structure
• Governance structure
• Track record of manager
• Principal terms of the fund/scheme
• Determination of the Net Asset Value of the units
• Any areas of conflicts of interest
  Fees, expenses and other charges charged to the fund
• Distribution waterfall

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