“Why should we be worried about hedge funds... We are not making any separate set of regulations for them... they have been investing in India through participatory notes. All we are telling them is if you want to come here, come through the front door,” Sebi Chairman M Damodaran told PTI in an interview.
“Hedge funds started as a normal class of investors. Over time, they became large with large investors started putting their money in these funds,” Mr Damodaran said. Hedge funds are mostly prevalent in developed markets like the US. These funds are generally used by wealthy individuals and institutions and adopt aggressive investment strategies. They are exempt from rules and regulations governing other mutual funds provided the number of investors are not more than 100.
“In FII regulations Act of 2004, hedge funds were not named as a separate class and no specific provisions were made for them... There were no separate regulations for them anywhere in the world,” he said, replying to a query on whether hedge funds should be considered a different class.
“Now they want to come to India and if they comply with the FII regulations we will consider application on the case of merit,” he added.
Short-selling
Sebi also said that the rules for short-selling will be announced soon. “We are ready for short-selling now... there is no hiccup and the regulations are coming very soon,” Damodaran said.
Damodaran said the guidelines were almost finalised and just a few formalities were left. Sebi at its board meeting on March 22 had approved a proposal to allow short-selling by both domestic and foreign institutional investors.