India to revamp funds regime

The Securities and Exchange Board of India is reportedly considering tinkering its rules on private investment funds. 

India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), is reportedly assembling a seven member panel of industry representatives to review the country’s rules on alternative investment funds.

Inc42 Magazine, a New Delhi-based finance title, first broke the news. The SEBI was unable to immediately respond to a request for comment.

The panel, led by Infosys founder NR Narayana Murthy, will reportedly review tax rules and foreign investment regulations to ease private capital fundraising in India.

“We are forming a standing committee on alternative investment funds for recommending measures for funding startups, taxation-related issues, among others,” an unidentified regulatory official with direct knowledge of the plans was quoted as saying.

Earlier in 2012, India introduced a more comprehensive private funds regime as a way of meeting international best standards.

The rules were in part introduced as a way of distinguishing private equity investors from their cousins in venture capital.

At the time, the SEBI said its venture capital rules, framed in 1996 to encourage investment in start-ups, were being used as an omnibus vehicle by buyout funds, venture capital, real estate and other private investment strategies – the effect of which has been a regulatory framework used by buyout shops that had infixed certain privileges and constraints more suitable for early-stage investors. 

Under the new regime, funds were categorised under a distinct asset class and governed by its own tailored rules. For instance, buyout funds are restricted from investing in listed companies, though if classified as a PIPE vehicle, would be permitted to invest in small listed companies not part of any market index.