Question
Which of the following statement regarding SEBIās
guidelines for Alternate Investment Funds (AIFs) related to participation in Credit Default Swaps (CDS) is not true?Solution
SEBI (Alternative Investment Funds) Regulations, 2012 (āAIF Regulationsā), have been amended and notified on January 09, 2023 to allow AIFs to participate in Credit Default Swaps (āCDSā) as protection buyers and sellers. Category I AIFs and Category II AIFs may buy CDS on underlying investments in debt securities, only for the purpose of hedging. Category III AIFs may buy CDS for the purpose of hedging or otherwise, within permissible leverage as specified by SEBI. Category I and Category II AIFs which transact in CDS, shall maintain thirty days cooling off period between the two periods of borrowing or engaging in leverage.
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