How are hedge funds regulated?

In India, hedge funds are regulated by the Securities and Exchange Board of India (SEBI) under the Alternative Investment Fund (AIF) regulations. Hedge funds are classified as Category III AIFs, which means they can use leverage and other complex trading strategies to generate returns, but are subject to higher regulatory oversight and disclosure requirements than other categories of AIFs.

The SEBI regulations require hedge funds to have a minimum investment size of INR 1 crore ($136,000) from each investor, and to provide regular disclosures on their trading activities, investment holdings, and risk management practices. Hedge funds are also subject to periodic inspections by SEBI to ensure compliance with the regulations.

In addition to SEBI regulations, hedge funds may also be subject to other legal and regulatory requirements depending on the jurisdiction in which they operate and the types of investors they serve. For example, hedge funds that serve US investors must register with the Securities and Exchange Commission (SEC) and comply with US securities laws and regulations.