New Delhi: SEBI, the capital market regulator in India, is expected to ease the regulatory burden on venture capital (VC) and private equity (PE) firms. These firms have become significant sources of risk capital for enterprises that often face neglect from the public market and traditional banks.
In an effort to simplify compliance procedures and reduce costs, SEBI announced its plans to conduct a comprehensive review of existing laws governing alternative investment funds (AIFs), which encompass VC and PE funds. To gather recommendations on reducing the compliance load, SEBI reached out to 20 fund officials and senior experts via email.
The industry has voiced concerns over excessive regulatory measures, viewing them as regulatory overkill. While SEBI has introduced new restrictions to prevent potential risks in this rapidly growing sector, it also acknowledges the necessity of lightening the regulatory burden on AIFs, which have proven to be a dependable source of capital for numerous enterprises.
One recent proposal from SEBI involved increasing the minimum investment in AIFs for non-accredited investors (those with lower earnings and net worth) from Rs 1 crore to Rs 2-3 crore. This suggestion aims to deter less sophisticated investors from participating in such funds.
Over the past year, SEBI has made several adjustments to AIF regulations. These include the implementation of a code of conduct for fund directors, managers, and intermediaries. Additionally, regulations have been put in place regarding the closure of funds, equal treatment of all investors, segregation of assets and liabilities across different schemes, adherence to stated fund tenure, and procedures for disclosing and resolving investor grievances.
Through these regulatory changes, SEBI seeks to strike a balance between ensuring the stability of the sector and facilitating smoother operations for AIFs. By streamlining compliance processes, the regulator aims to create a conducive environment for VC and PE firms to continue supporting enterprises in need of risk capital, fostering economic growth and innovation in India.