Investment funds in India: regulatory overview

A Q&A guide to investment funds law in India.

This Q&A is part of the multi-jurisdictional guide to investment funds. It provides a high level overview of investment funds in India, looking at both retail funds and hedge funds. Areas covered include a market overview, legislation and regulation, marketing, managers and operators, restrictions and requirements, tax and upcoming reform.

To compare answers across multiple jurisdictions, visit the Investment Funds Country Q&A tool. For a full list of jurisdictional Q&As visit www.practicallaw.com/investmentfunds-guide.

Contents

Retail funds

1. What is the structure of the retail funds market? What have been the main trends over the last year?

For the purpose of this Q&A, we have assumed that retail funds are funds aimed at the general public, which do not have any restrictions on the number of investors, and are considered as "retail" in general parlance as well. These are commonly known as mutual funds in India and our responses are therefore limited to "mutual funds" which are governed by the SEBI (Mutual Funds) Regulations 1996 (MF Regulations).

Open-ended retail funds

The mutual fund industry in India started in 1963 with the formation of the Unit Trust of India as an initiative of the Government of India and the Reserve Bank of India. The history of mutual funds in India can be broadly divided into three major phases:

  • Phase 1. The Unit Trust of India was the first mutual fund set up in India in 1963.

  • Phase 2. In the late 1980s, the government allowed mutual funds to be set up by public sector banks and financial institutions such as the Life Insurance Corporation of India and General Insurance Corporation of India.

  • Phase 3. In 1992, the Securities and Exchange Board of India (SEBI) Act was passed. The objectives of SEBI were to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market. SEBI introduced the SEBI (Mutual Funds) Regulations 1993 to govern the establishment and operation of mutual funds in India. The SEBI (Mutual Fund) Regulations of 1993 were substituted by more comprehensive and revised mutual fund regulations in 1996. The industry now functions under the MF Regulations.

Assets managed by the Indian mutual fund industry have grown from INR13.19 trillion (that is, a million million) in July 2015 to INR15.73 trillion in July 2016. That represents a 19% growth in assets over July 2015 (see www.amfiindia.com/Themes/Theme1/downloads/home/Industry-Trends-July-2016.pdf).

Closed-ended retail funds

Close-ended mutual funds are those which have a maturity date mentioned in the fund documents and once closed, no fresh units are issued. Earlier, only close-ended mutual funds were preferred by the managers. However, for the investors to have liquidity, all close-ended mutual funds are required to list their units on a recognised stock exchange.

There is no difference between the open-ended and close-ended mutual funds in terms of the registration and the eligibility criteria for such registration.

 

Regulatory framework and bodies

2. What are the key statutes, regulations and rules that govern retail funds? Which regulatory bodies regulate retail funds?

Open-ended retail funds

Regulatory framework. Mutual funds (that is, retail funds) in India are governed by the SEBI (Mutual Funds) Regulations 1996 (MF Regulations).

Regulatory bodies. The Securities and Exchange Board of India (SEBI) is the regulatory body that deals with mutual funds.

Closed-ended retail funds

Regulatory framework. Close-ended mutual funds in India are also governed by the MF Regulations.

Regulatory bodies. SEBI also regulates close-ended mutual funds.

 
3. Do retail funds themselves have to be authorised or licensed?

Open-ended retail funds

Mutual funds (that is, retail funds) are required to be registered with the Securities and Exchange Board of India (SEBI) under the SEBI (Mutual Funds) Regulations 1996 (MF Regulations), which set out the registration processes. The key requirements that apply to sponsors, managers and operators include a minimum professional experience of five years in portfolio or investment management, meeting the "fit and proper person" criteria as prescribed by SEBI, capital adequacy requirements and infrastructure requirements.

Mutual funds are required to be constituted in the form of a trust and the instrument of trust must be in the form of a deed, duly registered under the provisions of the Indian Registration Act 1908, executed by the sponsor in favour of the trustees named in the instrument.

There are differences between local funds and foreign funds. Foreign retail funds may, under certain circumstances register and invest in the Indian securities markets under the SEBI (Foreign Portfolio Investors) Regulations 2014 subject to meeting with certain requirements stipulated within them.

Closed-ended retail funds

See above, Open-ended retail funds.

 

Marketing

4. Who can market retail funds?

Open-ended retail funds

Units of a mutual fund (that is, a retail fund) cannot be marketed or sold by an intermediary unless such an intermediary has obtained certification from the National Institute of Securities Markets (NISM). Intermediaries who have been registered with the Association of Mutual Funds in India (AMFI) before 1 June 2010 will be exempted from having certification from NISM.

Intermediaries include distributors, agents, or any persons employed or engaged, or to be employed or engaged, in the sale or distribution of mutual funds or mutual fund units, registered brokers and sub-brokers. An intermediary can be an individual or a business entity.

Closed-ended retail funds

See above, Open-ended retail funds.

 
5. To whom can retail funds be marketed?

Open-ended retail funds

Units of a mutual fund (that is, a retail fund) can be marketed to the general public in India and certain identified foreign investors. The SEBI (Mutual Funds) Regulations 1996 (MF Regulations) do not provide for any restrictions on the category of persons to whom the mutual fund units can or cannot be marketed. The scheme units can be purchased by the following entities, among others (subject to the applicable legislation/regulation governing such entities):

  • Adult individuals, either singly or jointly, resident in India.

  • Companies or domestic corporate bodies or public sector undertakings registered in India.

  • Charitable, religious or other trusts authorised to invest in units of mutual funds.

  • Banks and financial institutions.

  • Non-resident Indians (NRIs), persons of Indian origin (PIOs) and those who have overseas citizenship of India (OCIs).

  • A Hindu undivided family (HUF) under the Hindu Marriage Act.

  • Sole proprietors, partnership firms, LLPs.

  • Mutual fund schemes or alternative investment funds (AIFs) subject to the Securities and Exchange Board of India (SEBI) Regulations applicable from time to time.

Closed-ended retail funds

See above, Open-ended retail funds.

 

Managers and operators

6. What are the key requirements that apply to managers or operators of retail funds?

Open-ended retail funds

The SEBI (Mutual Funds) Regulations 1996 (MF Regulations) prescribe certain criteria for the approval of asset management companies (AMC) to manage mutual funds (that is, retail funds) in India. For the grant of approval, the AMC will be required to fulfil, among others things, the following important criteria:

  • Net worth and profitability of the AMC, its general reputation and fairness in transactions.

  • The AMC is a fit and proper person.

  • The directors of the AMC are persons having adequate professional experience in the finance and financial services-related field.

  • The directors and key personnel have not been found guilty of moral turpitude or convicted of any economic offence or violation of any securities laws.

  • The AMC is a company registered in India which has a net worth of not less than INR500 million.

Further, under the existing foreign exchange regulations of India, foreign ownership is permitted up to 100% in the AMC under the automatic route.

The MF Regulations require the AMC to be a company registered under the Companies Act in India and therefore a foreign manager cannot manage a mutual fund in India.

Closed-ended retail funds

See above, Open-ended retail funds.

 

Assets portfolio

7. Who holds the portfolio of assets? What regulations are in place for its protection?

Open-ended retail funds

Under the trust structure, the trustee is the legal owner of the portfolio of assets of the fund, holding them for the benefit of the beneficiaries (investors) of the mutual fund (that is, retail fund). The SEBI (Mutual Funds) Regulations 1996 (MF Regulations) have extensive provisions for the protection of the unitholders. The MF Regulations also require a custodian to be appointed who must maintain the portfolio of assets of the mutual fund. The custodians are governed by the SEBI (Custodian of Securities) Regulations 1996.

Closed-ended retail funds

See above, Open-ended retail funds.

 

Legal fund vehicles

8. What are the main legal vehicles used to set up a retail fund and what are the key advantages and disadvantages of using these structures?

Open-ended retail funds

Legal vehicles. A mutual fund (that is, retail fund) is mandated to be established in the form of a trust under the SEBI (Mutual Funds) Regulations 1996 (MF Regulations). The participants' interest in a mutual fund is represented by a "unit".

Advantages. The Indian Trusts Act 1882 governs a trust. The trust laws are flexible laws which enable the settlor to draft its own constitution as compared to any other body corporate. There are no restrictions on the number of members (beneficiaries) that a trust can have and no restrictions on the redemption or buy-back of units, and there is no distribution tax payable by the fund. One of the main advantages of a trust structure is that taxation is only in the hands of the investors (one-level tax) and there are no restrictions on the quantum of distribution.

Disadvantages. While the trust does not have the benefit of a corporate veil, there are no substantial disadvantages in using a trust structure.

Closed-ended retail funds

See above, Open-ended retail funds.

 

Investment and borrowing restrictions

9. What are the investment and borrowing restrictions on retail funds?

Open-ended retail funds

Mutual funds (that is, retail funds) can invest in, under the SEBI (Mutual Funds) Regulations 1996 (MF Regulations):

  • Securities.

  • Money market instruments.

  • Private-placed debentures.

  • Securitised debt instruments (either asset-backed or mortgage-backed securities).

  • Gold or gold-related instruments.

  • Real estate assets.

  • Infrastructure debt instrument and assets.

Restrictions on investments. A mutual fund must not:

  • Invest more than 10% of its net asset value (NAV) in debt instruments issued by a single issuer.

  • Invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment must not exceed 25% of the NAV of the scheme.

  • Own more than 10% of any company's paid up capital carrying voting rights.

  • Buy and sell securities only on the basis of deliveries.

  • Make temporary investments in short term deposits of commercial banks, subject to the applicable laws.

  • Make any investment in:

    • any unlisted security of an associate or group company of the sponsor; or

    • any security issued by way of private placement by an associate or group company of the sponsor; or

    • the listed securities of group companies of the sponsor which is in excess of 25% of the net assets.

  • Invest more than 5% of its NAV in the unlisted equity shares or equity-related instruments in case of an open-ended scheme and 10% of its NAV in case of a close-ended scheme.

Restrictions on borrowings. A mutual fund is not permitted to borrow except to meet the temporary liquidity needs of the mutual fund for the purposes of repurchase, redemption of units or payment of interest or dividend to the unitholders. The amount of such borrowing must not be more than 20% of the net assets of the mutual fund and the duration of such borrowing must not exceed a period of six months. A mutual fund may lend and borrow securities in accordance with the framework relating to short-selling and securities lending and borrowing specified by the Securities and Exchange Board of India (SEBI).

Closed-ended retail funds

See above, Open-ended retail funds.

 
10. Can the manager or operator place any restrictions on the issue and redemption of interests in retail funds?

Open-ended retail funds

A mutual fund (that is, a retail fund) may impose certain restrictions on the amount to be raised by the mutual fund as well as the amount to be raised from each investor or category of investors. A mutual fund may also impose a lock-in within which an investor may not redeem or transfer units. However, the investor may transfer or redeem its units provided it pays an exit load to the mutual fund or asset management company (AMC).

Further, transfers of investments from one scheme to another scheme in the same mutual fund will be allowed only if:

  • Such transfers are done at the prevailing market price for quoted instruments on a spot basis. A "spot basis" has the same meaning as specified by the stock exchange for spot transactions.

  • The securities transferred conform with the investment objective of the scheme to which such a transfer has been made.

Closed-ended retail funds

Every close-ended scheme is required to be listed and, accordingly, free transferability is permitted.

The units of close-ended schemes may be open for sale or redemption at fixed predetermined intervals if the maximum and minimum amount of the sale, or the redemption of the units and the period of such a sale or redemption, has been disclosed in the offer document.

 
11. Are there any restrictions on the rights of participants in retail funds to transfer or assign their interests to third parties?

Open-ended retail funds

See Question 10.

Closed-ended retail funds

See Question 10.

 

Reporting requirements

12. What are the general periodic reporting requirements for retail funds?

Open-ended retail funds

Investors. A mutual fund (that is, a retail fund) must send all unitholders a complete statement of its scheme portfolio and a statement of account specifying the number of units allotted to the applicant, within one month from the end of each six months (that is, by 30 April in the case of a half year ending on 31 March and 30 October in the case of a half year ending on 30 September).

The asset management company (AMC) must also ensure that a consolidated account statement for each calendar month is issued, detailing all the transactions and holdings at the end of the month including transaction charges paid to the distributor, across all schemes of all mutual funds, to all the investors in whose portfolios' transactions have taken place during that month.

Regulators. Mutual funds are required to file the following reports with the Securities and Exchange Board of India (SEBI):

  • Audited annual statements of accounts including the balance sheet and the profit and loss account for the fund and in respect of each scheme, once a year.

  • Six monthly unaudited accounts.

  • Quarterly statement of movements in the net assets for each of the schemes of the mutual fund.

  • Quarterly portfolio statement, including changes from the previous periods, for each scheme.

Closed-ended retail funds

Investors. A mutual fund must send all unitholders a complete statement of its scheme portfolio and a statement of account specifying the number of units allotted to the applicant, within one month from the end of each six months (that is, by 30 April in case of half year ending on 31 March and 30 October in case of half year ending on 30 September).

An applicant must have the option either to receive the statement of accounts or to hold units in a dematerialised form. The AMC must issue a statement of accounts specifying the number of units allotted to the applicant or issue units in a dematerialised form to the applicant.

The AMC must ensure that a consolidated account statement for each calendar month is issued, detailing all the transactions and holdings at the end of the month including transaction charges paid to the distributor, across all schemes of all mutual funds, to all the investors in whose portfolios' transactions have taken place during that month.

Regulators. Mutual funds are required to file the following reports with SEBI:

  • Audited annual statements of accounts including the balance sheet and the profit and loss account for the fund and in respect of each scheme, once a year.

  • Six monthly unaudited accounts.

  • A quarterly statement of movements in the net assets for each of the schemes of the mutual fund.

A quarterly portfolio statement, including changes from the previous periods, for each scheme.

 

Tax treatment

13. What is the tax treatment for retail funds?

Open-ended retail funds

Funds. A mutual fund (that is, a retail fund) is exempt from income tax at the fund level on income and from gains arising to the fund from its investments.

Resident investors. Dividends distributed by equity-oriented mutual funds are exempted in the hands of the investors. As the income is exempt from tax, no tax is withheld by the mutual fund on distribution of this income.

As regards the sale or redemption of units of a mutual fund, the tax rates applicable are different where the units are held as investments and where the units are held as stock-in-trade. Where units are held as investments, the tax rates applicable will depend on whether the gain on sale of units is classified as a short term capital gain or a long term capital gain. Further, tax rates also differ between mutual funds that are equity-oriented and those which are not equity-oriented.

Non-resident Indians (NRIs) are another category of investors who enjoy certain tax benefits in India. Any dividend paid by an equity-oriented mutual fund to NRIs is tax exempt in the hands of such NRIs.

Non-resident investors. Dividends distributed by equity-oriented mutual funds are exempted in the hands of the investors. As the income is exempt from tax, no tax is withheld by the mutual fund on distribution of such income.

As regards the sale or redemption of units of a mutual fund, the tax rates applicable are different where the units are held as investments and where the units are held as stock-in-trade. Where units are held as investments, the tax rates applicable will depend on whether the gain on sale of units is classified as a short-term capital gain or a long-term capital gain. Further, tax rates also differ between mutual funds that are equity-oriented and those which are not equity-oriented.

While considering taxation in relation to mutual funds, the provisions of the General Anti-Avoidance Rules (which are applicable from 1 April 2017) may also be required to be considered.

Closed-ended retail funds

See above, Open-ended retails funds.

 

Quasi-retail funds

14. Is there a market for quasi-retail funds in your jurisdiction?

Currently, there are no quasi-retail funds in India.

 

Reform

15. What proposals (if any) are there for the reform of retail fund regulation?

Currently, there are no outstanding proposals for large scale amendments to the SEBI (Mutual Funds) Regulations 1996 (MF Regulations). However, the Securities and Exchange Board of India (SEBI) along with the Association of Mutual Funds in India (a self-regulatory body), constantly review the MF Regulations and propose amendments from time to time to meet with the evolving market requirements.

 

Hedge funds

16. What is the structure of the hedge funds market? What have been the main trends over the last year?

The Securities and Exchange Board of India (Alternative Investment Funds) Regulations 2012 (AIF Regulations) were issued in May 2012 by the Securities and Exchange Board of India (SEBI) and govern the establishment and operation of different types of alternative investment funds (AIFs) in India. The AIF Regulations introduced, inter alia, category III AIFs which are in essence hedge funds or funds which trade with a view to make short-term returns or such other funds which are open-ended. The AIF Regulations permit the category III AIFs to be either open-ended funds or close-ended funds. Prior to the AIF Regulations, there was no law governing such types of open-ended funds and any business of a similar nature was carried out by portfolio managers under the SEBI (Portfolio Managers) Regulations 1993.

As of 30 June 2016, 33 AIFs have been registered as category III AIFs from the inception of the AIF Regulations. From 30 June 2016, a total of about INR62.4 billion worth of commitments have been received by registered category III AIFs. In addition, the commitments raised as on 30 June 2016 are up by around three times the commitments raised by 30 June 2015 (source: www.sebi.gov.in/cms/sebi_data/attachdocs/1392982252002.html).

 

Regulatory framework and bodies

17. What are the key statutes and regulations that govern hedge funds in your jurisdiction? Which regulatory bodies regulate hedge funds?

Regulatory framework

The SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations) govern the registration and operation of category III alternative investment funds (AIFs) in India.

Regulatory bodies

The Securities and Exchange Board of India regulates the registration and operation of the category III AIFs through the AIF Regulations.

 
18. How are hedge funds regulated (if at all) to ensure compliance with general international standards of good practice?

Risk

All the category III alternative investment funds (AIFs) are required to disclose risk management tools to the investors in the placement memorandum. Further, all category III AIFs are required to provide information as regards the material risks and how they are managed which may include the:

  • Concentration risk at fund level.

  • Foreign exchange risk at fund level.

  • Leverage risk at fund and investee company levels.

  • Realisation risk (that is, the change in exit environment) at fund and investee company levels.

  • Strategy risk (that is, the change in or divergence from business strategy) at investee company level.

  • Reputational risk at investee company level.

  • Extra financial risks, including environmental, social and corporate governance risks, at fund and investee company level.

Valuation and pricing

Category III AIFs must ensure that calculation of the net asset value (NAV) is independent from the fund management function of the AIF and such NAV must be disclosed to the investors at least at quarterly intervals for close-ended funds and at least at monthly intervals for open-ended funds.

Insider dealing and market abuse

Like all other financial intermediaries, mutual funds and hedge funds are also subject to the following regulations:

  • SEBI (Prohibition of Insider Trading) Regulations 2015.

  • SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations 2003.

Transparency

The SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations) require the AIFs to disclose the following information to the investors to ensure transparency:

  • Financial, risk management, operational, portfolio, and transactional information regarding fund investments must be disclosed periodically to the investors.

  • Any fees ascribed to the manager or sponsor, and any fees charged to the AIF or any investee company by an associate of the manager or sponsor, must be disclosed periodically to the investors.

  • Any inquiries/ legal actions by legal or regulatory bodies in any jurisdiction, as and when they occurred.

  • Any material liability arising during the AIF's tenure must be disclosed, as and when it occurred.

  • Any breach of a provision of the placement memorandum, or agreement made with the investor or any other fund documents, if any, as and when these occurred.

  • Any change in control of the sponsor or manager or investee company.

Money laundering

Money laundering is generally governed in India by the Prevention of Money Laundering Act 2002.

Short selling

While there is no specific regulation governing the short selling of securities, the Securities and Exchange Board of India has issued a circular dated 20 December 2007 with respect to short selling and securities lending and borrowing. Further, the provisions of the following legislation would also be applicable in certain circumstances:

  • SEBI (Prohibition of Insider Trading) Regulations 2015.

  • SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations 2003.

 

Marketing

19. Who can market hedge funds?

Under the SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations), AIFs can only be marketed by a private placement. Further, if a person is characterised as an investment adviser, then such a person must be registered under the provisions of the SEBI (Investment Advisers) Regulations 2013 (IA Regulations). Managers of AIFs are exempt from registration requirements under the IA Regulations.

 
20. To whom can hedge funds be marketed?

While there is no specific restriction under Indian laws on the class of investors to whom alternative investment funds can be marketed, these are generally marketed to sophisticated investors such as institutions and high net worth individuals. No foreign hedge funds can be marketed in India.

 

Investment restrictions

21. Are there any restrictions on local investors investing in a hedge fund?

There are no restrictions on local investors investing in an alternative investment funds (AIF). However, such funds are not aimed at retail investors and therefore the SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations) require an investor to invest at least INR10 million in the AIF. Further, employees and directors of investment managers to the AIF are required to invest at least INR2.5 million in the AIF. However, for performance fees, the employees and directors of the investment managers are exempted from making any investment in the AIF.

 

Assets portfolio

22. Who holds the portfolio of assets? What regulations are in place for its protection?

The SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations) require a custodian to be appointed by the sponsor or manager of the category III AIF who must maintain the portfolio of assets of the category III AIF. The custodians are governed by the SEBI (Custodian of Securities) Regulations 1996.

 

Requirements

23. What are the key disclosure or filing requirements (if any) that must be completed by the hedge fund?

Disclosure. All alternative investment funds (AIFs) are required to issue a placement memorandum, from which it can raise funds from investors. Such a placement memorandum must contain all the material information about:

  • The AIF and the manager.

  • The background of the key investment team of the manager.

  • Targeted investors.

  • Fees.

  • All other expenses proposed to be charged.

  • Tenure of the AIF.

  • Conditions or limits on redemption.

  • The investment strategy.

  • Risk management tools and parameters employed.

  • Key service providers.

  • Conflicts of interest and procedures to identify and address them.

  • Disciplinary history.

  • The terms and conditions on which the manager offers investment services.

  • Its affiliations with other intermediaries.

  • The manner of winding up the AIF.

  • Such other information as may be necessary for the investor to take an informed decision on whether to invest in the AIF.

Filings. The SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations) require category III AIFs which do not undertake leverage to submit a report to the Securities and Exchange Board of India (SEBI) on a quarterly basis in a prescribed form. Category III AIFs which undertake leverage are required to submit reports on a monthly basis in a prescribed form. Further, the manager of an AIF is required to submit a compliance test report in a prescribed format to the SEBI at the end of each financial year.

 
24. What are the key requirements that apply to managers or operators of hedge funds?

The managers of category III alternative investment funds (AIFs) are exempted from registration under the SEBI (Investment Advisers) Regulations 2013.

A foreign manager may manage a category III AIF in India. However, foreign exchange regulations in India impose certain restrictions on the investments that can be made by an AIF which is controlled by a foreign manager or a manager in India which is owned or controlled by non-residents.

 

Legal fund vehicles and structures

25. What are the main legal vehicles used to set up a hedge fund and what are the key advantages and disadvantages of using these structures?

The SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations) permit a category III AIF to be established in the form of a trust or a company or a limited liability partnership or any other body corporate. However, typically most of the category III AIFs are established in the form of a trust. A few have been set up in the form of limited liability partnerships. The participants' interest in a category III AIF is represented by a "unit" or "partnership interest", as the case may be.

Advantages. The Indian Trusts Act 1882 governs a trust. The trust laws enable the settlor to draft its own constitution as compared to any other body corporate. There are no restrictions on the number of members (beneficiaries) that a trust can have and there are no restrictions on the redemption or buy-back of units. There are no restrictions on the quantum of distribution and there is no distribution tax payable by the fund. One of the main advantages of a trust structure is that taxation is only in the hands of the investors (one-level tax) and there are no restrictions on the quantum of distribution.

Disadvantages. While the trust does not have the benefit of a corporate veil, there are no substantial disadvantages in using a trust structure.

 

Tax treatment

26. What is the tax treatment for hedge funds?

Funds

The Income Tax Act 1961 provides for a pass-through status for category I and category II alternative investment funds (AIFs) whereby the income arising to the fund may be taxed in the hands of the investors directly. However, the category III AIFs are not entitled to a pass-through and therefore the income arising to category III AIFs may be taxed in the hands of the fund itself at a maximum marginal rate.

Resident investors

The income arising to category III AIFs may be taxed in the hands of the fund itself and accordingly there should not be any tax on distribution of such income to the investors.

Non-resident investors

See above, Resident investors.

 

Restrictions

27. Can participants redeem their interest? Are there any restrictions on the right of participants to transfer their interests to third parties?

Redemption of interest

Unless restricted in the placement memorandum, the investors should be able to redeem and transfer their interest to third parties.

Transfer to third parties

See above, Redemption of interest.

 

Reform

28. What (if any) proposals are there for the reform of hedge fund regulation?

Currently, there are no outstanding proposals for any major amendments to the SEBI (Alternative Investment Funds) Regulations 2012 (AIF Regulations). However, the Securities and Exchange Board of India, along with the Alternative Investment Policy Advisory Committee, constantly review the AIF Regulations and propose amendments to meet with the evolving market requirements.

 

Online resources

Securities and Exchange Board of India website

W www.sebi.gov.in

Description. The website is maintained by the Securities and Exchange Board of India, the regulator established under the Securities and Exchange Board of India Act 1992. The information contained on the website is official and up-to-date. The website is in English.



Contributor profiles

Dina Wadia, Joint Managing Partner

J. Sagar Associates

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Professional qualifications. India, Solicitor; India, Master of Laws; India, Bachelor of Laws

Areas of practice. Banking and finance (including investment funds); capital markets– debt capital markets; mergers and acquisitions and private equity.

Sahil Shah, Senior Associate

J. Sagar Associates

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Professional qualifications. India, Solicitor; India, Bachelor of Laws; India, Bachelor of Legal Sciences

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