SEBI Proposes Changes in Regulatory Framework for Special Situation Funds
The Securities and Exchange Board of India (SEBI) has proposed changes in the regulatory framework for Special Situation Funds (SSFs) in order to enhance transparency and accountability in the functioning of these funds.
SSFs are alternative investment funds (AIFs) that invest in distressed assets or companies facing financial difficulties. These funds play a crucial role in the Indian economy by providing capital to struggling businesses and helping them turn around.
The proposed changes by SEBI aim to address certain issues and concerns raised by stakeholders regarding the functioning of SSFs. One of the key changes is the requirement for SSFs to have a minimum corpus of Rs 100 crore, as opposed to the current requirement of Rs 50 crore. This increase in minimum corpus is expected to attract more serious and experienced players in the market, thereby improving the overall quality of SSFs.
SEBI has also proposed that SSFs should have a minimum investment of Rs 1 crore from each investor, as opposed to the current requirement of Rs 25 lakh. This is to ensure that only high net worth individuals and institutional investors, who have the necessary expertise and risk appetite, are investing in SSFs.
Another significant change proposed by SEBI is the requirement for SSFs to have a lock-in period of five years for their investments, as opposed to the current requirement of three years. This is to align the lock-in period with the tenure of the fund, and to discourage short-term investments in distressed assets.
In addition, SEBI has proposed that SSFs should have a minimum investment of 75% of their corpus in distressed assets, as opposed to the current requirement of 65%. This is to ensure that SSFs are focused on their core objective of investing in distressed assets, and not diverting their funds to other avenues.
Furthermore, SEBI has proposed that SSFs should have a minimum of two investment managers, as opposed to the current requirement of one. This is to ensure that there is adequate oversight and risk management in the functioning of SSFs.
SEBI has also proposed that SSFs should have a minimum of five investors, as opposed to the current requirement of 20. This is to ensure that SSFs have a diversified investor base and are not dependent on a few investors for their funding.
The proposed changes by SEBI are aimed at improving the functioning of SSFs and making them more attractive to investors. These changes are expected to bring in more transparency, accountability, and stability in the distressed asset market, which will ultimately benefit the Indian economy as a whole.
In conclusion, the proposed changes in the regulatory framework for SSFs by SEBI are a step in the right direction towards creating a more robust and efficient market for distressed assets in India. These changes will not only benefit investors, but also struggling businesses in need of capital, and contribute to the overall growth and development of the Indian economy.
