Informist, Thursday, Nov 16, 2023

--SEBI Narayan: AIF applications pending for 3 mos now down to zero 
--SEBI Narayan: Have started getting more data from AIF industry 
--SEBI Narayan: No accountability in rapid change of AIF valuations 
--SEBI Narayan: Degree of confidence in AIF valuations uncertain 
--SEBI Narayan: Potential for conflict of interest in AIF valuations 
--SEBI Narayan: Regulatory framework must not be burdensome 
--SEBI Narayan: Need to guard trust in AIF ecosystem 
--SEBI Narayan: Actual invest by AIFs at 3.5 trln rupees as of Jun 
--SEBI Narayan: India on a good path on financialisation of savings 

MUMBAI – The Securities and Exchange Board of India may re-allow alternative investment funds to accept funds in junior tranches if these schemes meet the required regulatory norms, Ananth Narayan, whole-time member of the regulatory body, said today.

"We have stopped schemes which have junior tranches since last year; that's because we saw many of these schemes being misused, as I mentioned earlier. We are happy to allow junior tranche if checks and balances are kept in place," Narayan said at a conference on capital markets organised by the Federation of Indian Chambers of Commerce and Industry.

In November last year, the market regulator had directed alternative investment funds to stop treating investors differently when it came to sharing losses. 

As senior tranche of investors gets priority in distribution over the junior tranche of investors, profit distribution is done first to the senior tranche of investors while they are compensated for loss out of the residual capital of junior class investors.  

Narayan said that India is on a "good path" in regard to financialisation of savings, adding that investment by alternative investment funds stood at 3.5 trln rupees as of June end.

He also emphasised the need to guard trust in alternative investment funds ecosystem.

He reiterated that the capital market regulator is closely watching cases where alternative investment funds are investing in assets classes which are not allowed by other regulators.

Financial institutions also use alternate investment funds as they have flexibility to route investments into certain thematic sectors which have sectoral limits, for which he said that the regulator has seen cases where the sectoral cap has been breached.

Narayan said that the SEBI has now started getting more data from alternative investment funds industry. He also said that there is no accountability in rapid fluctuation in valuations of alternate investment funds, and there is a lot of potential for conflict of interest in valuations.

Narayan also said that regulatory framework must not be burdensome, adding that the alternate investment fund applications pending for 3 months now stand at zero.  End 

Reported by Richard Fargose and Kshipra Petkar

Edited by Akul Nishant Akhoury

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