New Delhi: For a greater oversight of hedge funds and other Alternative Investment Funds (AIFs) with cross-border presence, Sebi has reached regulatory cooperation and information exchange pacts with its counterparts in 31 European countries.
These include Germany, France, Spain, Italy, Luxembourg, Denmark, Cyprus, Greece, Hungary, Norway, Liechtenstein, Belgium, the Netherlands, Portugal, Finland and the UK.
As per the Memorandum of Understanding (MoU) finalised between Sebi and its European peers, they would be able to "consult, cooperate and exchange information" with regard to the supervision and oversight of AIFs, as also their managers and other related entities.
AIFs include hedge funds, private equity funds, start-up funds, venture capital funds, SME funds, among others.
These MoUs have been finalised at the initiative of the EU region capital markets regulator, European Securities and Markets Authority (ESMA), as part of the European Parliament's Alternative Investment Fund Managers Directive (AIFMD).
The MoUs provide for "ongoing, informal, oral consultations, supplemented by more in-depth cooperation" between Sebi and its 31 European counterparts, as also the written exchange of non-public information whenever necessary.
Besides, the regulators would also facilitate for each other the cross-border on-site visits in connection with their regulatory and supervisory functions.
Under the AIFMD regime, such cooperation agreements have been made necessary for allowing such funds and their managers from outside EU region to access any of the EU market or perform their fund management businesses by delegation from EU-based entities.
The treaties would allow the EU and non-EU authorities will be able to supervise fund managers that operate on a cross-border basis both within and outside Europe. The co-operation would also include mutual assistance in the enforcement of the respective laws.
As per the MoU, "no domestic secrecy, blocking laws or regulations should prevent an authority (Sebi etc) from providing assistance to other authorities", although any of its signatories can deny information on the grounds of the national public interest.
The cooperation are aimed to be most useful in cases like initial application, on-going oversight, regulatory approvals or supervisory actions and enforcement actions with regard to the AIFs and their managers.
Besides, Sebi and its counterparts would need to inform each other about any material event that could adversely impact the covered entity and the overall market. For any forward passage of information received under the MoU, the regulators would need to take a permission from the other party.