The Securities and Exchange Board of India (Sebi) has raised its vigil on alternative investment funds including domestic private equity (PE) and hedge funds, reported Economic Times.
The capital markets regulator has made surprise inspections at offices of at least 20 PE and hedge funds in the last few weeks to examine whether they are fully compliant with the laws, said people with direct knowledge of the matter.
Lawyers and market participants said such unexpected checks by regulatory officials at AIF offices are a recent phenomenon as Sebi has received complaints against these funds in the recent past.
During these inspections, Sebi is learnt to have checked if the funds have complied with various securities laws applicable. This includes adherence to portfolio concentration norms and timely disclosure to investors, the report said.
In the past, Sebi gave market institutions prior notice — usually a ten-day period — before the inspection. The regulator has now changed tack, exercising its powers to show up at the registered offices of market participants without giving any prior notice, said the people in the know, it further said.
Amid the stock market rally from March 2020 to October 2021, investment vehicles like mutual funds and AIFs have received a flood of money from investors. The total investments made by AIFs have risen 85% to ₹2. 84 lakh crore in March 2022 from ₹1. 53 lakh crore in March 2020, according to Sebi data.
Investor requirements for differentiated services from mutual funds have resulted in AIFs mushrooming across the country. Market participants and lawyers said Sebi is adopting a more proactive approach toward surveillance of AIFs.