India's market regulator, SEBI, has settled cases with 29 venture capital funds for a combined amount of approximately ₹2 crore. The funds, including notable names like Gaja Capital and Blume Ventures, had violated old rules by holding investments beyond their permitted liquidation periods.
This non-compliance stemmed from a regulatory transition where older venture capital fund rules were replaced by the Alternative Investment Funds regime in 2012. To resolve the lingering issue, SEBI introduced a 2024 regulatory tweak and a 2025 settlement scheme, which the 29 funds opted into to avoid enforcement actions.
The main topics covered are a regulatory settlement, non-compliance by venture capital funds with liquidation rules, and the evolution of SEBI's framework for alternative investment funds.
Mumbai: The Securities and Exchange Board of India (Sebi) has settled cases with 29 venture capital funds including funds managed by Gaja Capital, Faering Capital, SBI Macquarie Infrastructure Trust, Blume Ventures and True North Fund, for alleged securities law violations.
These firms agreed to pay a total settlement amount of about '2 crore, the regulator said in an order on Monday.
The settlement relates to non-compliance with Sebi's erstwhile regulations governing venture capital funds. These funds continued to hold unliquidated investments even after the expiry of their liquidation period in violation of the rules.
Under the regulatory framework, venture capital funds were required to wind up schemes within the specified tenure and liquidation timeline.
The issue arose after Sebi introduced the Alternative Investment Funds (AIF) Regulations, 2012, which replaced the earlier VCF regime. While existing venture capital funds were allowed to continue under the old rules until their schemes were wound up, several schemes remained active beyond their permitted liquidation period.
To address this issue, Sebi tweaked the AIF Regulations in 2024 to allow venture capital funds to migrate to the AIF framework and deal with residual investments. At the same time, the regulator also introduced the VCF Settlement Scheme 2025, offering funds an opportunity to resolve potential enforcement actions by paying a settlement fee.
Following a public notice issued in July last year, 29 venture capital funds opted for the scheme. Settlement amounts ranged from '2 lakh to '9.5 lakh per scheme, depending on the case.
The regulator said the settlement would close enforcement proceedings related to the identified violations for the applicants.
These firms agreed to pay a total settlement amount of about '2 crore, the regulator said in an order on Monday.
The settlement relates to non-compliance with Sebi's erstwhile regulations governing venture capital funds. These funds continued to hold unliquidated investments even after the expiry of their liquidation period in violation of the rules.
Under the regulatory framework, venture capital funds were required to wind up schemes within the specified tenure and liquidation timeline.
The issue arose after Sebi introduced the Alternative Investment Funds (AIF) Regulations, 2012, which replaced the earlier VCF regime. While existing venture capital funds were allowed to continue under the old rules until their schemes were wound up, several schemes remained active beyond their permitted liquidation period.
To address this issue, Sebi tweaked the AIF Regulations in 2024 to allow venture capital funds to migrate to the AIF framework and deal with residual investments. At the same time, the regulator also introduced the VCF Settlement Scheme 2025, offering funds an opportunity to resolve potential enforcement actions by paying a settlement fee.
Following a public notice issued in July last year, 29 venture capital funds opted for the scheme. Settlement amounts ranged from '2 lakh to '9.5 lakh per scheme, depending on the case.
The regulator said the settlement would close enforcement proceedings related to the identified violations for the applicants.
Meridiano
