Gopal Srinivasan
In a May 13 circular, Sebi mandated that 'at least one key personnel' on the investment team of the 'manager of an alternative investment fund (AIF)' should have NISM (National Institute of Securities Market) certification by passing the NISM Series-XIX-C exam. This regulation came into force from May 10 and will have to be complied with by May 9, 2025.
What does Sebi hope to achieve by setting down this rule for investment managers? One can only assume the following:
Positive signalling: It would send a powerful signal to teams and communities of the prowess of a certified fund manager.
Certification=legitimacy: Almost every other profession - lawyers, company secretaries and doctors - requires certification. Moreover, with changes to the regulatory regime, experienced professionals have undergone additional examinations to become insolvency professionals under IBC, chartered valuers, or chartered financial analysts. Certification brings legitimacy and is an invaluable tool for any profession's self-regulating ability.
Lifelong learning: As professionals, the value of adapting to changing business environments can't be understated. Taking this exam not only encourages young professionals, but also exemplifies a commitment to continuing education and evolution.
Sebi's decision may be met with scepticism, especially among the senior PE/VC community. However, it makes sense on several front:
Go Global: The market regulator has significantly altered how AIFs operate since introducing AIF guidelines in 2012. Each change has aimed to gain recognition for this asset class, contributing to the remarkable growth of AIF commitments in the past decade. It's time for Indian fund managers to position themselves as global leaders, challenging Western dominance.
Understanding the biz: The playbook and charter are clear. Achieving the 60% pass threshold should be easy for most practising managers, even without studying the material. But it's more than just dry legal governance. Reading NISM's exam material explains the rationale behind the AIF business model's features. It's satisfying to review them for a consistent understanding and application of the business model's specific terminology.
Creating a talent pool: It makes sense for the next generation of professionals, not to mention India's pressing need to create numerous funds and cultivate talent to manage them.
We should welcome the decision, but those of us who can't and are still having qualms over it can take refuge in the words of George Burns, 'You can't help getting older, but you don't have to get old.'
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