SEBI Consultation paper on proposal to enhance trust in the Alternative Investment Funds (‘AIF’) ecosystem to facilitate Ease of Doing Business measures
Capital markets regulator Securities and Exchange Board of India (SEBI) has released a consultation paper to enhance trust in the Alternative Investment Funds (AIF) ecosystem to facilitate ease of doing business measures.
The Alternative Investment Fund (AIF) industry has grown over the past few years, with the investments rising to Rs. 3.5 lakh crore as on September 30, 2023. When compared with mutual funds and PMS, AIFs are meant to face softer regulations. And the scheme of things has been abused to circumvent regulations, thus eroding the trust in the institution. There were more than 40 cases involving more than Rs. 30,000 crore where AIFs were structured to facilitate circumvention of certain financial sector regulations. Some of the popular techniques to float AIFs to avoid regulations include ever-greening of loans, avoiding FEMA norms and avoiding QIB regulations.
To address the specific regulatory concerns, it is proposed to introduce a general obligation in the existing AIF regulations that would require AIFs, managers and their key management personnel to ensure that their operations do not facilitate circumvention of regulations.
SEBI doesn’t want regulation to prevent genuine investment. So, the regulator is asking for public comments for the proposal, which can be submitted till February 11, 2024.
