On August 1, 2011, the Securities and Exchange Board of India (SEBI) proposed a comprehensive set of draft regulations for all types of Alternative Investment Funds (AIFs), including private equity, venture capital, private investment in public equity, real estate and strategy funds (which includes hedge funds). SEBI published the “Concept Paper on Proposed Alternative Investment Funds Regulation” in response to gaps in India’s regulatory regime and the concomitant risks to its markets. The proposals aim to deter unfair trade practices and mitigate conflicts of interest via regulations mandating registration, imposing disclosure requirements, and setting limits on targeted investors, fund size, fund tenure, and fund strategies, including the extent of leverage and use (without investor consent) of complex structured products. The resulting regulations, termed “SEBI (AIF) Regulations of 2011,” overhaul the regulatory regime currently in place, which had allowed funds, including hedge funds, to conduct business effectively without oversight. See “Working Paper Analyzes India’s Approach to Hedge Fund Regulation
,” Hedge Fund Law Report, Vol. 1, No. 14 (Jun. 19, 2008). This article details the background of the regulatory environment that resulted in this concept paper, and the proposed regulations as they pertain to hedge funds. For a discussion of a jurisdiction in which hedge fund managers commonly organize entities to access Indian opportunities, see “Hedging into Africa through Cayman and Mauritius
,” Hedge Fund Law Report, Vol. 4, No. 7 (Feb. 25, 2011).