Sebi resolves issue of circumventing AIF regulations – Rediff Money

Sebi’s whole-time member, Ananth Narayan G, spoke at an event organized by CII in Mumbai, stating that the issue of alternative investment funds (AIFs) has been successfully addressed after a year-long dialogue between the capital markets regulator and the industry.

Narayan expressed Sebi’s concerns regarding instances where important regulations, such as foreign exchange management and non-performing asset recognition, were being bypassed through AIFs. He highlighted the need to resolve such misuse of AIFs to uphold regulatory integrity.

The intense scrutiny on the role of AIFs in recent times has led to policy actions by various regulatory bodies, including the Reserve Bank. Narayan emphasized that Sebi was made aware of regulatory violations not by the industry itself but by external stakeholders, leading to a deficit of trust.

To bridge this gap, Sebi engaged with the industry lobby organization IVCA to collaborate on finding solutions. Together, they developed a framework to address regulatory loopholes with industry consensus.

The solutions implemented aim to prevent both type-1 and type-2 errors. Type-1 errors, such as market manipulation and fraud, pose challenges for regulators, while type-2 errors occur as regulators try to prevent type-1 errors, as explained by Narayan.

In his address, Narayan also stressed the importance of India evolving from being merely a back office to more of a frontline player on the global stage. He cited examples of countries like Korea and Taiwan, urging India to proactively invest in Research and Development to realize its full potential.

While acknowledging the benefits of being a back office, Narayan emphasized the need for India to transition towards a more proactive and innovative approach in driving its future growth. He expressed confidence in India’s ability to take on this role, provided the country recognizes its capabilities and invests in fostering innovation.

In conclusion, Narayan highlighted the significance of India proactively refining its position in the global landscape and investing in R&D to propel future growth and development.