Alternative Investment Funds (AIFs) in India are regulated by the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Funds) Regulations, 2012. To operate legally, AIFs must comply with several regulatory requirements designed to protect investors and ensure transparency.
First, AIFs must register with SEBI before commencing operations. The AIF registration process involves submitting detailed information about the fund, its sponsors, investment strategy, and management team. The applicant must also meet eligibility criteria, including a minimum corpus requirement, which varies depending on the category of the AIF.
Once registered, AIFs are required to comply with ongoing disclosure norms. This includes periodic submission of financial statements, portfolio details, and compliance reports to SEBI. AIFs must also maintain proper books of accounts and appoint an auditor for annual audits.
Additionally, there are restrictions on the types of investments AIFs can make, depending on their category—Category I, II, or III. These categories define the fund’s investment objectives and risk profiles, influencing their regulatory obligations.
AIF managers must adhere to investor protection norms, such as ensuring transparency in fees and preventing conflicts of interest. Non-compliance with these requirements can attract penalties or suspension of registration. Therefore, strict adherence to compliance is crucial for smooth functioning and investor confidence in the Indian AIF ecosystem.
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