Regulatory body suggests less stringent rules for Alternative Investment Funds (AIFs) that cater to certified investors

Regulatory body suggests less stringent rules for Alternative Investment Funds (AIFs) that cater to certified investors

The Securities and Exchange Board of India (SEBI) has proposed the introduction of a new category of Alternative Investment Fund (AIF) schemes, called AI-only schemes, for accredited investors[1][2][3]. These funds will consist only of Accredited Investors, high-net-worth individuals or entities that meet specific financial criteria ensuring the ability to evaluate complex investment risks independently[1][3].

Key Details of SEBI’s Proposal:

Recognizing that Accredited Investors possess financial sophistication and risk awareness, SEBI aims to reduce the regulatory burden that standard AIFs face, thereby encouraging more capital mobilisation and flexible fund structuring for this investor group[1].

Under the proposed framework, AI-only schemes will be governed under a lighter-touch regulatory framework compared to regular AIFs[3]. This includes exemptions from some standard AIF compliance norms such as maintaining pari-passu rights among investors and mandatory NISM certification for key investment team members[4]. Additionally, there will be reduced documentation and disclosure requirements tailored to the risk profile and expertise of accredited investors.

The proposed reforms also include lowering minimum subscription thresholds to promote significant, long-term investments from accredited investors[5].

Implications:

With lighter regulations and term extension options, fund managers can pursue long-term, potentially illiquid investment strategies that are often aligned with growth sectors or infrastructure development. This could deepen India’s alternative investment market, aligning regulatory requirements with investor sophistication, and fostering innovation in investment products[1][3][5].

By easing entry and compliance norms for well-informed investors, the proposal aims to attract more capital into the alternative investment ecosystem. While the framework relaxes certain regulations, consent-based controls (like the term extension approval by investors) aim to preserve investor interests without unduly hampering fund operations.

SEBI is currently seeking public comments and stakeholder feedback on these proposals to fine-tune operational, governance, and eligibility aspects before finalization[1][3].

Additional Information:

• The number of accredited investors is currently modest, but recent relaxations and proposed improvements are expected to boost participation.
• KYC registration agencies and streamlined accreditation norms are part of the proposed improvements to increase participation of accredited investors.
• The Securities and Exchange Board of India (SEBI) has extended the deadline for public comments on the AI-only AIF proposals until August 29.
• The IPO of BlueStone Jewellery and Lifestyle is opening today in the price band of ₹492-517.
• The stock price of Firstsource Solutions is currently ₹367.85.
• SEBI has proposed setting up a LME-style metal and mineral trading exchange in India.

[1] Livemint, SEBI proposes lighter touch regulations for AI-only AIFs, August 10, 2025. [2] Economic Times, SEBI proposes to ease norms for AI-only AIFs, August 10, 2025. [3] Financial Express, SEBI proposes to ease norms for AI-only AIFs, August 10, 2025. [4] Business Standard, SEBI proposes to ease norms for AI-only AIFs, August 10, 2025. [5] Moneycontrol, SEBI proposes to ease norms for AI-only AIFs, August 10, 2025.

1. The Securities and Exchange Board of India (SEBI) has proposed introducing AI-only schemes, a new category of Alternative Investment Fund (AIF) schemes, to foster investment in complex investment risks by business-savvy individuals.
2. The proposed framework for these AI-only schemes includes exemptions from certain regulation and compliance norms, lowered minimum subscription thresholds, and reduced documentation and disclosure requirements, making it easier for investors to participate.
3. By relaxing entry and compliance norms for accredited investors, SEBI aims to attract more capital into the alternative investment industry and encourage flexible fund structuring for this investor group.
4. With lighter regulations, fund managers can pursue long-term investments strategies that align with growth sectors or infrastructure development, potentially deepening India’s alternative investment market.
5. SEBI has proposed innovative reforms, such as a LME-style metal and mineral trading exchange in India, to further stimulate investment and growth in various business sectors.

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