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SEBI may regulate private equity
11 April 2011: Private equity funds, hitherto unregulated, are set to come under Securities & Exchange Board of India (SEBI) regulations. The market regulator has already started work on regulating private equity players and guidelines will be issued soon.
The regulations will be on the lines of venture capital funds, which are also regulated by the SEBI. The venture capital regulation requires mandatory registration with SEBI and enjoys the status of a qualified institutional buyer. The proposed regulations from SEBI come at a time when internationally, there are concerns over private pools of capital such as private equity. In fact, in the past, RBI had also talked about regulating private equity. It has already spoken of tightening the norms for bank-sponsored funds. The guidelines will also help clarify some of the concerns that private equity investors have while investing in India.
Regulatory concerns increased following the global financial crisis as private equity and hedge funds were seen to be lacking transparency. In India, over the years, private equity has gained in significance as they invest in smaller companies and exit when they gain in size, often at a hefty premium to their investment value.
Source: Times of India