Sebi approves proposal to frame regulation for AIFs
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The Securities and Exchange Board of India's (Sebi) board on Monday approved the proposal to frame regulation for alternate investment funds (AIF). The board approved that AIFs such as private equity funds, real estate fund, hedge fund, etc will have to register with Sebi under the AIF regulations.
The board also approved to repeal the Sebi (Venture Capital Funds) Regulations 1996 but said that the existing VCFs will continue to be regulated by it until their existing schemes wind up. While existing VCFs can't raise fresh funds after notification of the new regulations, existing funds not registered under the VCF regulations would be able to float schemes only under AIF regulations.
The board approved that an AIF cannot accept an investment amount of less than Rs 1 crore from an investor. While the minimum corpus should be Rs 20 crore, the number of investors should not exceed Rs 1,000.
Sebi has segregated alternate investment funds into three categories.
Category I includes VCF, SME funds, infrastructure funds which will be close ended with a minimum tenure of three years and will not engage in leveraging. They will qualify for concessions by Sebi or the government.
Category II will include PE, debt funds, fund of funds, etc. While remaining close-ended and not engage in leveraging, they will not receive any concessions.
Category III includes hedge funds which can be open or close-ended and may engage in leveraging.
They will be regulated closely on operational standards, prudential requirement, redemption restrictions and conflict of interest.
Clearing house to be separated
Maintaining that the clearing corporation or clearing house fully bears the risk of payment and delivery by providing a guaranteed settlement of all transactions on the exchange, the Sebi has decided that the central role of the clearing function will be separated into an independent corporation with its own prescribed net worth
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