Standard Setting Forum for AIFs

SEBI often mandates something at a high level. It might say units must be held in demat form, or that audit reports must follow a standard shape. But someone still has to work out the operational detail: what format, what fields, what process.

That job belongs to the Standard Setting Forum for AIFs, or SFA. The workbook calls it a pilot industry forum. It sets implementation standards for Category III AIFs, working in consultation with SEBI.

Two concrete outputs of the SFA appear in the workbook. First, when SEBI required AIFs to issue units in dematerialised form, it was the implementation standards formulated by the pilot SFA, in consultation with SEBI, that specified the formats for information and the records AIF managers must maintain — including how investor-wise holdings and transactions in the Aggregate Escrow Demat Account are reported to Depositories and Custodians. Under those SFA standards, units already issued to existing investors who have not yet provided their demat account details are credited to this separate Aggregate Escrow Demat Account, opened by the AIF solely to hold demat units on their behalf.

Second, a standard reporting format for the PPM Audit Report has been prepared by SEBI in consultation with the pilot Standard Setting Forum for AIFs (SFA), giving every Category III AIF's annual compliance audit a common shape across the industry rather than each fund designing its own report format.

Meridian Category III AIF completes its transition to demat-form units. Of its 60 investors, 8 have not yet furnished their demat account details by the SEBI-mandated deadline. Following the SFA's implementation standards, Meridian opens an Aggregate Escrow Demat Account and credits those 8 investors' units into it, reporting the investor-wise holdings within that account to its depository and custodian in the format the SFA has specified — rather than leaving those units unresolved, or refusing to issue them at all.

Separately, when Meridian's external auditor conducts the annual PPM audit, it uses the standard reporting format that SEBI prepared in consultation with the SFA — meaning the audit findings for Meridian's fund are structured the same way as every other Category III AIF's PPM audit report, making it possible for SEBI and investors to compare compliance findings across the industry rather than parsing a different format from every fund.

Chapter 5, section 5.8 (Dematerialisation of AIF Units), names the SFA directly as the body behind the Aggregate Escrow Demat Account standards, and Chapter 4, section 4.2.9 (Auditors), names it again as the co-author of the PPM Audit Report's standard format. Expect SFA tested as the answer to "which pilot body, in consultation with SEBI, sets implementation standards for AIFs" — a fact easy to overlook because it appears only in footnoted asides in two separate chapters.

• The SFA is described as a "pilot" forum — the workbook is explicit about this status, which is itself sometimes tested.
• The SFA works in consultation with SEBI; it does not replace SEBI's own rule-making. SEBI still mandates the underlying requirement (demat units, a PPM audit) — the SFA fills in the operational standard beneath it.
• The Aggregate Escrow Demat Account is for investors who have not yet furnished demat details, not a general-purpose holding account for all AIF units — do not extend its use beyond that specific gap-filling purpose.
• Do not confuse the SFA's PPM Audit Report format with the PPM Audit itself — the SFA supplies the reporting template; the audit obligation and its 6-month deadline come from the AIF Regulations directly.