Sebi curbs AIF schemes with priority distribution model

The Securities Exchange Board of India (Sebi) has halted alternative investment funds (AIFs) with a priority distribution model from accepting fresh commitments. A priority distribution model allows some investors to exit a scheme ahead of others, which is currently not explicitly restricted in AIF Regulations. Some AIFs offer select limited partners, or investors, in AIFs a priority payout, whereby they get their principal investment back before other investors. This may especially happen in the case of distressed funds, where there may be greater investment risks.