India’s Security markets regulator SEBI (Securities Exchange Board of India) has approved the SEBI (Alternative Investment Funds) Regulations, 2012 to bring unregulated funds under its purview, ensure systemic stability, increase market efficiency and enable the formation of new capital. These regulations will be applicable to all pooled investment vehicles apart from Mutual Funds, CIS Schemes, Family Trusts, ESOP Trusts, Employee Welfare Trusts, holding companies, funds managed by Asset Reconstruction Companies, Securitisation Trust or funds directly regulated by any other regulator in India. Some of the regulations approved by the board include: - Registration: All Alternative Investment Funds (AIFs), whether operating as Private Equity Funds, Real Estate Funds or Hedge Funds should be registered with SEBI. - Withdrawal of old VC Fund Regulations: The SEBI (Venture Capital Funds) Regulations of 1996 will be officially withdrawn, however existing venture capital funds will continue to be regulated by the regulations until the fund winds down its operations and they will not be allowed to raise any fresh funds, except for the previous investor commitments. That being said, Venture Capital funds can also opt to re-register themselves under the new AIF regulations, provided they receive the approval to do so from 66.67% of their investors and can seek exemption from the board from strictly adhering to these regulations, in case they are not able to comply with all the new regulations. - Unregistered funds will not be allowed to launch new schemes without registering with SEBI under the new AIF regulations. The existing schemes which were…
