SEBI may ease norms for AIF investments

Sebi may ease norms for AIF Investments

Decisions likely at board meeting to take place on May 20

The Securities and Exchange Board of India ( Sebi) is likely to relax rules for investing in alternative investment funds ( AIFs) on the suggestions of an expert panel headed by Infosys founder NR Narayana Murthy, said sources close to the development.

A decision is likely at Sebi’s board meeting scheduled for May 20.

AIFs are funds established or incorporated in India for the purpose of pooling capital by Indian and foreign investors for predetermined investing. The rules apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds.

The minimum ticket size for investing in AIFs is ? 1 crore. Individuals with an annual income of ? 50 lakh are allowed to invest in these vehicles. The Sebi board is likely lower these criteria.

The Murthy panel submitted its report to the market regulator in January. It proposed a favourable tax environment for investors, promoting onshore fund management, and changing the regulatory regime.

The panel also recommended lower taxes. AIFs attract 10 per cent long- term capital gains tax on transfer of shares of private limited companies.

“The panel has suggested several tax reforms. Sebi is not in a position to implement those but can recommend them to the finance ministry. Suggestions on sub- categorisation of AIFs and clarifications on investible limits may be implemented by regulator,” said Tejesh Chitlangi of IC Legal.

Sector players have been asking Sebi to repeal all investment management regulations such as AIF Regulations, PMS Regulations, Advisers Regulations and replacing them with a single AIF Manager Regulations. Chitlangi said such a move would be premature and might not be considered by Sebi.

Introduction of the securities transaction tax on private equity and venture capital investments is also part of the committee’s proposals.

Broader access to capital

Amit Maheshwari, partner, Ashok Maheshwary & Associates, said easing AIF regulations would provide start- ups broader access to capital. The current funding slowdown could be offset by these regulatory changes, he added.

The Sebi board is also likely to ease foreign portfolio investors ( FPI) regulations. Only funds that are registered and regulated in their home market are now allowed to invest in India.

The board might also allow a single licence for equity and commodity brokers.

WHAT ARE AIFs?

These are classified under three categories

Category- I

are those funds thatgetincentives from the government, Sebi orotherregulatorlike infrastructure funds, SME funds etc.

Category- II

are those thatcan investanywhere in any combination butare prohibited from raising debt, exceptformeeting theirday- to- day operational requirements

Category- III

are those trading with a viewto making short- term returns and includes hedge funds among others 209 Alternative InvestmentFunds ( AIFs) have been registered since August2012

Business Standard New Delhi, 3rd  May  2016