Last year, SEBI had issued a concept
paper on comprehensive regulation for alternative investment funds (AIFs). The
proposal to set up a separate framework was approved by SEBI at its board
meeting held last month. This proposal has now been operationalised by the
promulgation of the SEBI
(Alternative Investment Funds) Regulations, 2012, which were notified
yesterday.
paper on comprehensive regulation for alternative investment funds (AIFs). The
proposal to set up a separate framework was approved by SEBI at its board
meeting held last month. This proposal has now been operationalised by the
promulgation of the SEBI
(Alternative Investment Funds) Regulations, 2012, which were notified
yesterday.
These new regulations are expected to
affect private equity, venture capital and other investment firms by
introducing a registration requirement with SEBI. An AIF is defined quite
broadly in Reg. 2(b) to mean any “fund established or incorporated in India”
which is a “privately pooled investment vehicle which collects funds from
investors, whether Indian or foreign, for investing it in accordance with a
defined investment policy for the benefit of its investors”. A number of
specific investment funds such as mutual funds, collective investment schemes,
family trusts, ESOP trusts, etc. are expressly excluded.
affect private equity, venture capital and other investment firms by
introducing a registration requirement with SEBI. An AIF is defined quite
broadly in Reg. 2(b) to mean any “fund established or incorporated in India”
which is a “privately pooled investment vehicle which collects funds from
investors, whether Indian or foreign, for investing it in accordance with a
defined investment policy for the benefit of its investors”. A number of
specific investment funds such as mutual funds, collective investment schemes,
family trusts, ESOP trusts, etc. are expressly excluded.
There are three categories of registration depending on the nature of the fund and the risk to investors (based on leverage, complexity in trading strategies, etc.). Limitations are also placed on the manner in which the AIFs are operated. A summary is contained in the notification link above, and a previous discussion of the regulations’ impact is contained in the first two links above (to previous posts on this Blog).