A PEAK INTO ALTERNATIVE INVESTMENT FUNDS - SEBI AND FEMA PERSPECTIVE
Background:
Till 2012 Investment Management regulations of SEBI were limited only to Mutual Funds (MF), Collective Investment Schemes (CIS), Venture Capital Funds (VCF) and Portfolio Managers, and were well regulated. In the absence of dedicated regulations, other private pools of capital and investment vehicles like PE Funds (Private Equity), Real Estate Funds, etc used VCF route for investments. This defeated the basic purpose of VCF which was promotion of early stage companies. As the concessions and other benefits generally available to VCFs cannot be extended to other funds, the need was felt to recognize such other funds as “Alternative Investment Funds” as a distinct asset class apart from promoter holdings, creditors and public investors.
Accordingly, SEBI has released a concept paper in August 2011 followed by issuing SEBI (Alternative Investment Funds) Regulations (herein after referred as ‘AIF Regulations’) in May 2012 and were amended time to time. SEBI (Venture Capital Funds) Regulations, 1996 were repealed and related provisions were subsumed in to AIF Regulations. However, SEBI (Foreign Venture Capital Investor) Regulations are not subsumed and are still governed separately.