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Australian Journal of Asian Law

Abstract from Volume 11 No 1 (2009)

Strategies for Host-country Regulation of Hedge Funds: Lessons from India’s Approach

Umakanth Varottil is a Graduate Student Tutor at the National University of Singapore; PhD (expected 2010) Faculty of Law, NUS; LLM, New York University School of Law; BA, LLB (Hons), National Law School of India University. This is a revised version of a paper presented at the 5th Asian Law Institute Conference held in Singapore in May 2008.

Hedge funds tend to employ aggressive investment strategies and highly leverage their funds. While hedge funds enhance liquidity and efficiency in financial markets, they also engage in complex financial transactions that may result in systemic losses that are often borne by the financial markets in which they invest. In this context, the role of regulation of hedge funds in the host countries that receive their investment assumes importance. The Indian securities regulator, the Securities and Exchange Board of India (SEBI), has employed various regulatory strategies to regulate hedge fund investments. These include strategies of prohibition, disclosure, restriction and registration. Using the example of SEBI’s measures in the Indian context, the article examines the dynamics involved in regulating the offshore hedge fund industry, discusses the advantages and drawbacks of each regulatory strategy, and sets out certain guiding principles for regulating offshore hedge fund investments.

(2009) 11(1) Asian Law 113

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