SEBI’s whole time member Ananth Narayan G on Tuesday said the issue of alternative investment funds (AIFs) being used to circumvent regulations has been “resolved” after detailed discussions between the markets regulator and the industry.
“We have, to our satisfaction, resolved this issue of AIFs being used to circumvent regulations,” Narayan said at an event organised by the Confederation of Indian Industry.
Narayan said the SEBI did not get to know of the violations from the industry, but from other stakeholders, adding that this created a trust deficit. Any erosion in the trust would be a setback for the capital formation process and the regulator is ready to facilitate the industry to navigate the risks to define the future.
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He said the regulator is actively participating in building trust among investors through AIFs, with a light touch of regulatory framework acting as a tool to protect them, make capital available, generate productive assets and invest in risk-taking projects. “AIF hold high hopes with much of the private equity flowing from the FDI route under them,” Narayan said, adding that inflows from the domestic industry into AIFs have crossed Rs 13 lakh crore, with Rs 2.2 lakh crore flowing in 2024 itself.
As the trust deficit came to its notice, SEBI started interacting with industry lobby group Indian Venture and Alternate Capital Association to find solutions, the WTM said. These solutions helped avoid both type-1 and type-2 errors. Type-1 errors are the ones which are a “nightmare” for regulators including aspects like market manipulation, fraud etc, while type-2 errors are the ones which occur as a regulator attempts to prevent type-1 errors, Narayan explained.
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