The Securities and Exchange Board of India (SEBI) has published its draft SEBI (Alternative Investment Funds) Regulations, 2011, which seek to introduce a comprehensive regulatory framework to regulate private pools of capital, also known as alternative investment funds (AIFs). At present, SEBI regulates mutual funds, collective investment schemes, venture capital funds (VCFs) and portfolio managers.
The draft regulations will regulate AIFs which collect funds from institutional or high net worth investors in India and those who manage AIFs for investments in India. The draft regulations will include the existing SEBI (Venture Capital Fund) Regulations, 1996 (VCF Regulations), although existing VCFs will continue to be regulated by the VCF Regulations until the fund or scheme is wound up.
Categories of AIFs
The draft regulations aim to draw clear distinctions between AIFs by setting out the investment criteria and relevant regulatory concessions for each fund. The following categories of AIF have been identified:
- Venture Capital Fund
- PIPE Fund
- Private Equity Fund
- Debt Fund
- Infrastructure Equity Fund
- Real Estate Fund
- SME Fund
- Social Venture Fund
- Strategy Fund (residual category, including hedge funds)
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
