Mumbai : In a noteworthy development, Sebi has proposed stricter norms for Alternative Investment Funds (AIFs), its Managers and Key personnel.
The proposal to bring stricter norms for AIFs was mooted amidst instances of the Instrument being used to facilitate ever greening of stressed loans and circumvention of other financial sector regulations, according to a consultation paper issued by Sebi.
The proposal aims to enhance trust in the Alternative Investment Funds ecosystem to facilitate ease of doing business, says the Sebi paper.
While the AIF has registered a robust growth over the years, a number of instances of AIFs being structured to facilitate circumvention of different financial sector regulations have come to light, thereby eroding trust in the system, the market regulator said.
It. Is important to take steps to restore the trust and prevent such circumvention to ensure sustained capital formation while at the same time ensuring minimal impact on legitimate AIF investments, Sebi said.
In its consultation paper, Sebi proposes to introduce a general obligation in the existing AIFs, managers and their key management personnel to ensure that their operations and investment do not facilitate circumvention of regulations administered by any Financial sector regulator.
The enhanced trust that should result from such a process, along with the process to verify adherence to the accompanying standards, would provide a regulatory comfort in considering other ease of doing business proposals relating to AIFs which are under examination with Sebi, the regulator further said.
Sebi has now invited comments from people till February 11 on the proposals.
In the past few months, the regulator has detected more than 40 cases involving Rs 30,000 crores (out of investments of over Rs 3.5 lakh crore) where AIFs appear to have been structured to facilitate circumvention of certain financial sector regulations, the regulator further added.
