The
case relates to India Credit Opportunities Fund II, a Category II AIF managed by Modulus Alternatives Investment Managers. During its examination of the Fund's quarterly activity reports, SEBI observed that the investment manager's capital drawdowns were not made on a pro-rata basis in line with drawdowns from other investors, resulting in a breach of the continuing interest requirement prescribed under Regulation 10(d) of the SEBI (Alternative Investment Funds) Regulations, 2012, read with the relevant provisions of SEBI's Master Circular for Alternative Investment Funds.
According to SEBI, the investment manager's cumulative drawdowns consistently lagged behind those of other investors between 24 August 2023 and 27 March 2025. While other investors had drawn down as much as 80.69% of their commitments by October 2024, the investment manager had drawn only 40% of its committed capital during the same period. The remaining ₹3 crore was drawn only on 27 March 2025, bringing its total drawdown to 100% of its commitment.
SEBI noted that the continuing interest requirement requires an investment manager to maintain its contribution in proportion to the capital drawn from other investors in the fund. The regulator concluded that Modulus Alternatives Investment Managers remained in breach of this requirement until the non-compliance was rectified during the quarter ending March 2025.
The company subsequently filed a suo motu settlement application under the SEBI (Settlement Proceedings) Regulations, 2018, seeking to resolve the matter. Following discussions before SEBI's internal committee (IC) and consideration by the high-powered advisory committee (HPAC), the regulator approved the settlement of the proceedings.
The IC computed a settlement amount of ₹10.88 lakh, which the company accepted. After approval by SEBI's panel of whole-time members (WTM), a demand notice was issued, and the company informed the regulator that it had remitted the settlement amount.
Under the settlement order, SEBI will not initiate enforcement action against Modulus Alternatives Investment Managers for the alleged violations. However, the regulator said it retained the right to reopen the matter if any representation made during the settlement proceedings is later found to be false, if the settlement conditions are breached, or if discrepancies emerge in the determination of the settlement terms.
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