Securities and Exchange Board Of India (Alternative Investment Funds) Regulations, 2012

Scope of the Regulations and applicability to existing funds

All AIFs whether operating as Private Equity Funds, Real Estate Funds, Hedge Funds, etc. must register with SEBI under the AIF Regulations.

SEBI (Venture Capital Funds) Regulations, 1996 (“VCF Regulations”) have been repealed. However, existing VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the fund is wound up. Existing VCFs, however, shall not increase the targeted corpus of the fund or scheme as it stands on the day of   Notification of these Regulations. Such VCFs may also seek reregistration under AIF regulations subject to approval of 66.67% of their investors by value.

Existing funds not registered under the VCF Regulations will not be allowed to float any new scheme without registration under AIF Regulations. However, schemes floated by such funds before coming into force of AIF Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no rollover/ extension or raising of any fresh funds shall be allowed.

Existing funds not registered under the VCF Regulations which seek registration but are not able to comply with all provisions of AIF Regulations may seek exemption from the Board from strict compliance with the AIF Regulations.

Categories of funds

 The Regulation seeks to cover all types of funds broadly under 3 categories. An application can be made to SEBI for registration as an AIF under one of the following 3 categories:-

i.                     Category I AIF – those AIFs with positive spillover effects on the economy,  for which certain incentives or concessions might be considered by SEBI or Government of India or other regulators in India; and which shall include Venture Capital Funds, SME Funds, Social Venture Funds, Infrastructure Funds and such other Alternative  Investment Funds as may be specified. These funds shall be close ended, shall not engage in leverage and shall follow investment restrictions as prescribed for each category. Investment restrictions for VCFs are similar to restrictions in the existing VCF Regulations.

ii.                   Category II AIF – those AIFs for which no specific incentives or concessions are given by the government or any other Regulator; which shall not undertake leverage other than to meet day-to-day operational requirements as permitted in these Regulations; and which shall include Private Equity Funds, Debt Funds, Fund of Funds and such other funds that are not classified as category I or III.  These funds shall be close ended, shall not engage in leverage and have no other investment restrictions.

iii.                  Category III AIF – those AIFs including hedge funds which trade with a view to make short term returns; which employs diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives.     These funds can be open ended or close ended. Category III funds shall be regulated through issuance of directions regarding areas such as operational standards, conduct of business rules, prudential requirements, and restrictions on redemption, conflict of interest as may be specified by the Board.

Other salient features

(i)      The Alternative Investment Fund shall not accept from an investor an investment of value less than rupees one crore. Further, the AIF shall have a minimum corpus of Rs. 20 crore.

(ii)    The fund or any scheme of the fund shall not have more than 1000 investors.

(iii)   The manager or sponsor for a Category I and II AIF shall have a continuing interest in the AIF of not less than 2.5% of the initial corpus or Rs.5 crore whichever is lower and such interest shall not be through the waiver of management fees.

(iv)  For Category III Alternative Investment Fund, the continuing interest shall be not less that 5% of the corpus or rupees ten crore, whichever is lower.

(v)    Category I and II AIFs shall be close-ended and shall have a minimum tenure of 3 years. However, Category III AIF may either be close-ended or open-ended.

(vi)  Schemes may be launched under an AIF subject to filing of information memorandum with the Board along with applicable fees.

(vii) Units of AIF may be listed on stock exchange subject to a minimum tradable lot of rupees one crore. However, AIF shall not raise funds through Stock Exchange mechanism.

(viii)                       Category I and II AIFs shall not be permitted to invest more than 25% of the investible funds in one Investee Company. Category III AIFs shall invest not more than 10% of the corpus in one Investee Company

(ix)  AIF shall not invest in associates except with the approval of 75% of investors by value of their investment in the Alternative Investment Fund.

(x)    All AIFs shall have QIB status as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

(xi)  The Regulations provide for transparency and disclosures and mechanism for avoidance of conflict of interest

Click here to view the Securities and Exchange Board Of India (Alternative Investment Funds) Regulations, 2012.

Amendments Proposed to The Dowry Prohibition Act, 1961

The National Commission for Women (NCW) has proposed recommendations to amend the Dowry Prohibition Act, 1961 in 2009. The major recommendations include:-

1.       Amendment to definition of dowry.

2.       Provision for registration of lists of gifts received at the time of marriage.

3.       Provision for separate penalties for giving and taking of dowry.

4.       Penalties for non-maintenance of lists of gifts received at the time of the marriage.

5.       Insertion of a new clause providing an opportunity to the woman to file a case at the place where the offence was committed or where she permanently/temporarily resides. 

6.       Protection officers appointed under the Protection of Women from Domestic Violence Act, 2005 to carry out the duties of the Dowry Prohibition Officers.

The Ministry is currently examining the proposed amendments as stated by the Minister for Women and Child Development, Smt. Krishna Tirath in a written reply to a question in the Rajya Sabha on 3rd May, 2012.

100 Percent FDI in Single Brand Retail

Department of Industrial Policy and Promotion Ministry of Commerce and Industry on 10^th January 2012, notified the decision to allow 100 per cent FDI in Single brand retail via Press Note No.1 (2012 Series).

Presently Foreign Direct Investment (FDI), in retail trade, is prohibited except in single brand product retail trading, in which FDI, up to 51% is permitted, subject to conditions specified under paragraph 6.2.16.4 of 'Circular 2 of 2011- Consolidated FDI Policy'. The Government of India has reviewed the extant policy on FDI and decided that FDI, up to 100%, under the government approval route, would be permitted in Single-Brand Product Retail Trading, subject to specified conditions.

The conditions are:

(a) Products to be sold should be of a 'Single Brand' only.

(b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India.

(c) 'Single Brand' product-retail trading would cover only products which are branded during manufacturing.

(d) The foreign investor should be the owner of the brand.

(e) In respect of proposals involving FDI beyond 51%, mandatory sourcing of at least 30% of the value of products sold would have to be done from Indian 'small industries/ village and cottage industries, artisans and craftsmen'. 'Small industries' would be defined as industries which have a total investment in plant & machinery not exceeding US $ 1.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. Further, if at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry' for this purpose. The compliance of this condition will be ensured through self-certification by the company, to be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain.

Click here to view the Press Note

Consumer Protection (Amendment) Bill, 2011

A Press Release by the Ministry of Consumer Affairs, Food & Public Distribution on 4^th January 2012 elucidates the Amendments that are proposed to be made in the Consumer Protection Act, 1986.

The Consumer Protection Act, 1986, paved way for consumer disputes redressal agencies in 629 District, 35 State and National levels to render simple, inexpensive and speedy justice to consumers in respect of complaints against defective goods, deficient services and unfair or restrictive trade practices.

The Amendments proposed includes:  

• On line filing of consumer complaints

Making provision for registering complaint by electronic form (on line filing complaint)- Since the Consumer Forums are being computerized it is proposed to make provision in the law to permit consumers to file complaints as well as pay fee online, which would make the consumer for a move towards e-governance/ time bound redressal.

• Enforcement of orders as a Decree of Civil Court

Making provision that an order of the District Forum / State Commission/ National Commission will be enforced as a Decree of a Civil Court- This modification is considered essential in view of the experiences gained during implementation of the amended Act and is intended to deter willful offenders and also to ensure speedy and proper execution of the order of the consumer forums, so that justice to the aggrieved consumers is not frustrated.

• Payment to be made for non-compliance of the order

Making provision for payment by every person for not complying of the order of District Forum / State Commission / National Commission of an amount of not less than Rs.500 or 1½ per cent of the value of the amount awarded- whichever is higher, for each day of delay of such non-compliance of the order. This modification is considered essential in view of the experiences gained during implementation of the amended Act and is intended to deter willful offenders and also to ensure speedy and proper execution of the orders of the consumer forums, so that justice to the aggrieved consumers is not frustrated.

• Powers to District Forum

Empowering District Forum to function in any other place apart from District HQrs, in consultation with State Government / State Commission - This provision is considered necessary to allow State Governments the flexibility to club neighboring Districts Forum as also give additional charge to President/Members to hear cases in more than one District Forum so as to effectively deal with the non-functionality of Districts Forum caused due to vacancy of President/Member.

Conferring powers to District Forum to issue order to the opposite party to pay reasonable rate of interest on such price or charges as may be decided by the District Forum- This provision is considered necessary to empower the consumer forum to award interest where the consumer has suffered due to protracted litigation.

• Powers to State Government in selection process

Empowering State Government to refer back the recommendation of the Selection Committee for making fresh recommendation in order to avoid any delay in the Selection process- This is felt necessary to facilitate quicker filling up of the posts in the Consumer Forums and to avoid the consumer Forum remaining non-functional for long due to such vacancy thereby adversely affecting consumers’ interest.

• Increase of age in the appointment

Increasing the minimum age for appointment as Member in the case of State Commissions from 35 to 45 years, and in case of National Commission from 35 to 55 years- This is proposed to improve the quality of persons applying for these posts.

• Experience for members

Increasing the period of experience for appointment as Member in the case of State Commission from 10 years to 20 years and in the case of National Commission from 10 years to 30 years-This is proposed in order to improve the quality of persons applying for these posts.

• Powers to National Commission / State Commission to direct any one to assist the case

Conferring powers to National Commission / State Commission to direct any individual or organization or expert to assist National Commission / State Commission in the cases of large interest of the consumers- This provision would enable the National Commission or the State Commission, in cases involving the larger interests of the consumers, an opportunity to suo moto enlist the services of an expert or an outside party, in an ongoing case, in the interest of justice.

• Monitoring system of pending cases

Conferring powers to Central Government to call upon periodical reports of pending cases from National Commission and to State Government from State Commission or any District Forum- The provision is considered necessary to enable easy availability of data regarding filing and disposal of consumer complaints, which would help in monitoring the functioning of the consumer for a and effectiveness of the law.