What does it take to be an AIF manager

Mumbai: If Sachin Bansal or Vijay Shekhar Sharma were planning to lead an angel fund or manage a private equity pool, they would have hit a wall till the other day. Notwithstanding their success and experience, the two gentlemen — one an IIT graduate and the other holding an engineering degree in electronics and communication — lack the necessary qualification prescribed by the Indian capital markets regulator.Anyone approaching the Securities & Exchange Board of India (Sebi) in recent times for setting up an alternative investment fund (AIF)-- the regulatory term for PE, VC and angel funds — was told the key person, or at least one of them, must be either a chartered accountant or hold an MBA (Finance) degree.So, some funds hired dummy MBAs to get around the rule; others, more importantly, questioned why an IITian or a post-graduate from LSE or other reputed universities do not qualify for the role. Amid queries and representations from potential managers and fund sponsors, the subject cropped up at the recent Sebi board meeting. The regulator, it’s learnt, is now taking a relook at the eligibility rules to make them more flexible.“The board has approved new regulations that give a lot of flexibility... Earlier, the requirement was that at least one person needs to have some relevant qualification in finance and relevant experience and there was full flexibility otherwise. Now even that has been relaxed. One person can have relevant qualification and another one can bring in experience... No need for the same person to have both. Also, it has been clarified that any MBA (not just MBA in finance) will be considered relevant,” a Sebi official told ET.“I do empathise with Sebi which has to lay down rules for managers who are handling huge public money. Somewhere, the regulator has to draw a line. But in the process it had become too prescriptive,” said a senior consultant with a professional management firm. Indeed, even industry veterans like Krishnakumar Natarajan, one of the Mindtree cofounders, had to deal with the rule while setting up a fund.‘Time for Realistic Rule’After months of due diligence and following references from senior persons in finance, Sebi cleared the application. What probably helped Natarajan -- a mechanical engineer and XLRI alumni majoring in marketing and systems — was his experience and association with other funds. Natarajan declined to comment on the matter.According to Sebi’s AIF regulations, the key investment team of the manager of AIF must have adequate experience, with at least one key person having not less than five years of experience in advising or managing pools of capital or in fund or asset or wealth or portfolio management or in the business of buying, selling and dealing of securities or other financial assets and has relevant professional qualifications. Till now, Sebi interpreted “relevant professional qualifications” as degrees like CA or MBA (Finance). This is about to change. “It’s time Sebi tweaks the rule to make it more realistic. So far, it has been quite insistent about the specific qualifications. For instance, it has been asking for the transcript of degree certificates from overseas universities,” said a senior lawyer. “Also, is an MBA (Finance) from a little-known school a more relevant qualification than a post-graduate or doctorate degree in economics or pharmacy or in any fields of technology?”

from Economic Times https://ift.tt/2GGUa5x