Part 37 closes this extended AIF FAQ library with a practical, investor-facing topic — what happens when something goes wrong, and how grievances get raised and resolved.
Q1. What is SCORES, and how does it apply to AIF investors?
SCORES (SEBI Complaints Redress System) is SEBI's online platform allowing investors to lodge complaints against SEBI-registered intermediaries, including AIFs and their managers — providing a formal regulatory channel distinct from direct communication with the fund manager itself.
Q2. Should an investor go straight to SCORES for any grievance, or first raise it directly with the fund manager?
Best practice, and often the more efficient path, is to first raise the grievance directly with the fund manager (or trustee, for trust-structured AIFs) through the fund's own investor communication channels, since many issues — a reporting delay, a clarification on a capital account statement — can be resolved without a formal regulatory complaint; SCORES becomes relevant where direct resolution isn't achieved satisfactorily.
Q3. What kinds of issues do AIF investors typically raise as grievances?
Common categories include delayed or inaccurate investor reporting, disputes over fee or carry computation, disagreements over valuation methodology or NAV figures, delayed distributions, and disputes over the correct application of subsequent-closing catch-up/equalisation mechanics — many of which trace back to ambiguous or poorly drafted PPM language (see Part 3 of this series on PPM audits).
Q4. Are AIF managers required to have an internal grievance redressal mechanism, distinct from SCORES?
Yes — as part of good governance practice and often as an explicit regulatory and PPM-disclosed commitment, fund managers are expected to maintain a defined internal process for investors to raise and have grievances addressed, rather than directing every concern straight to a regulatory complaint.
Q5. What information should an investor include when raising a grievance through SCORES against an AIF?
Typically, the specific nature of the complaint, relevant supporting documentation (correspondence with the fund, statements, PPM excerpts relevant to the dispute), and confirmation of prior attempts to resolve the matter directly with the fund manager, since SEBI's process generally expects evidence of a reasonable attempt at direct resolution first.
Q6. Does SEBI mediate or arbitrate disputes between investors and fund managers, or only investigate regulatory non-compliance?
SEBI's role through SCORES and its broader regulatory oversight is primarily focused on ensuring the fund manager's compliance with applicable regulations and addressing regulatory violations — it is not equivalent to a civil court or arbitral tribunal resolving contractual or commercial disputes between an investor and a manager, which may require separate legal recourse depending on the nature of the dispute.
Q7. What contractual dispute resolution mechanisms are typically built into an AIF's PPM or investor agreements?
Many PPMs include specific dispute resolution provisions — commonly arbitration clauses specifying the process, seat, and governing rules for resolving disputes between investors and the fund/manager — intended to provide a defined mechanism distinct from, and often preferred over, generic litigation for commercial disputes arising under the fund documents.
Q8. If a valuation disagreement arises between an investor and the fund manager, how is this typically resolved?
This depends on what the PPM specifies — some funds include a mechanism for independent third-party valuation review or dispute escalation to the trustee (for trust-structured funds) in the event of a valuation disagreement; where the PPM is silent on this, resolution may default to the general dispute resolution/arbitration mechanism in the fund documents.
Q9. What role does the trustee play if an investor grievance relates to the manager's own conduct?
The trustee's fiduciary oversight role (see Part 22 of this series) is specifically relevant here — a trustee genuinely exercising independent oversight provides investors a channel to raise manager-conduct concerns to a party with fiduciary oversight authority, distinct from raising the concern with the very manager whose conduct is in question.
Q10. Can an investor's grievance about a fund manager affect that manager's other funds or future fundraising?
A pattern of unresolved grievances, or grievances escalating to formal regulatory complaints or findings, can affect a manager's broader reputation and, in serious cases, its fit and proper standing (see Part 29 of this series) — which is one reason well-governed managers treat grievance resolution as a priority rather than a peripheral administrative matter.
Q11. What proactive steps can a fund manager take to minimise investor grievances before they escalate?
Clear, timely, and accurate periodic reporting; transparent, well-documented fee and valuation methodology consistent with the PPM; a genuinely accessible internal channel for investors to raise questions or concerns; and prompt, substantive responses rather than delayed or defensive communication when issues are first raised.
Q12. Should prospective investors ask about a fund manager's grievance and dispute resolution track record during due diligence?
Yes — alongside performance and governance questions covered in our Due Diligence for AIF Managers article and Part 17 of this series, understanding how a manager has historically handled investor concerns (responsiveness, transparency, willingness to engage constructively) is a meaningful, if less commonly asked, due diligence dimension.
Building Governance That Prevents Grievances Before They Start
Most AIF grievances trace back to ambiguous PPM language or inconsistent operational practice — exactly what our PPM audit and fund accounting engagements are designed to catch before they become investor disputes.
This FAQ is for general informational purposes and does not constitute legal advice on dispute resolution specific to any fund or investor grievance.