The Securities and Exchange Board of India (SEBI) has introduced a set of proposals aimed at easing investment into Alternative Investment Funds (AIFs) in India for Accredited Investors (AIs). By offering targeted relaxations, the regulator seeks to streamline compliance requirements, attract quality capital, and support a more efficient fundraising environment for entrepreneurs and risk-takers.
Key Highlights of the Proposals
1. Launch of AI-only Schemes
SEBI plans to create a new category of AIFs exclusively for Accredited Investors. These AI-only schemes will operate with lighter compliance obligations, recognizing that accredited investors possess higher risk awareness and sophistication.
2. Greater Flexibility for Large Value Funds (LVFs)
Large Value Funds, which already involve high-ticket investments, will receive additional regulatory relaxations when investors are accredited. This includes exemptions from certain disclosure requirements and operational flexibilities.
3. Option for Existing AIFs to Switch
Existing AIFs will be allowed to transition into AI-only or LVF categories, subject to SEBI’s approval. This gives fund managers the flexibility to realign their schemes with the new framework.
4. Accreditation as a Reliable Measure
Currently, Alternative Investment Funds (AIFs) in India are based on a minimum investment threshold, which may not necessarily reflect an investor’s knowledge. SEBI proposes accreditation as a more robust measure, ensuring only financially aware and risk-ready investors gain access to reduced regulatory oversight.
5. Transition Framework
To avoid disruption, SEBI suggests a glide path approach:
- Existing schemes will continue under current norms.
- New AI-only schemes will be launched in parallel.
- Accredited Investors may enjoy additional benefits, including exemption from pari-passu obligations and extended fund tenure (up to 5 years more than regular schemes).
- AI-only schemes will face no cap on the number of investors, unlike the 1,000-investor limit applicable to regular AIFs.
6. Reduced Investment Threshold for LVFs
The minimum investment threshold for LVFs is proposed to be reduced from ₹70 crore to ₹25 crore. This relaxation is expected to make LVFs more accessible while still targeting large-scale investors.
Conclusion
SEBI’s proposal to ease norms for accredited investors in Alternative Investment Funds (AIFs) in India marks a progressive step toward fostering innovation and investment flexibility. These changes aim to enhance investor participation and boost India’s alternative investment landscape. For expert guidance on AIF compliance and registration, visit www.corpzo.com