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04-04-2012, 10:54 AM #1
Sebi proposes norms for alternative funds
Widening its ambit by bringing in unregulated funds like hedge funds, capital market regulator Sebi has proposed a comprehensive framework in the form of Alternative Investment Funds (AIFs) Regulations.
"With a view to extending the perimeter of regulation to unregulated funds and ensuring systemic stability, increasing market efficiency, encouraging formation of new capital and providing investor the Board approved proposal to frame Sebi (Alternative Investment Funds) Regulations, 2012," the regulator has said in a press statement.
As per the proposed regulation, Alternative Investment Funds (AIFs), operating as private equity funds, real estate funds, hedge funds etc, must register with Sebi under the AIF Regulations.
Sebi (Venture Capital Funds) Regulations, 1996 shall be repealed, it said.
However, Sebi said, existing VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the fund is wound up.
Existing VCFs, however, shall not raise any fresh funds after notification of these regulations except commitments already made by investors as on date of the notification, it said.
"The proposed regulation will provide necessary impetus to the local fund raising against existing practice of overseas fund raising," said Mahendra Swarup president of Indian Private Equity & Venture Capital Association.
The new regulation has prescribed a threshold limit of Rs 1 crore for investors of private equity and venture capital fund, he said, adding, it will help promote the industry.
Further, the AIF shall have a minimum corpus of Rs 20 crore, the regulator proposed.
The fund or any scheme of the fund shall not have more than 1,000 investors, it said, adding, the manager or sponsor shall have a continuing interest in the AIF of not less than 2.5 per cent of the initial corpus or Rs 5 crore whichever is lower.
Sebi further said existing funds not registered under the VCF Regulations will not be allowed to float any new scheme without registration under AIF Regulations.
However, schemes floated by such funds before coming into force of AIF Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no rollover or extension or raising of any fresh funds shall be allowed, it said.
The proposed regulation seeks to cover all types of funds broadly under three categories.