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Informist, Saturday, Aug. 9, 2025

 

MUMBAI – The Securtities and Exchange Board of India Friday floated a consultation paper which proposes to introduce option of alternative investment funds, exclusively for accredited investors which will have easier regulation framework. The draft circular is open for comments by market participants and public by Aug. 29, SEBI said. 

 

The paper seeks to adopt accredition status as a determining factor for risk sophistication of an investor in an alternative investment fund from the current minimum commitment threshold which is currently at INR 10 million. The consultation paper cited that certain investors with inflated commitments could onboard the funds, and the same could not be true representation of the risk taking ability of the investor. 

 

"As the commitment provided by an investor may not necessarily be a parameter of the investor's financial health (as against income or net-worth criteria), there is a possibility of investors putting majority of their wealth in AIFs, which are, by design, a riskier investment asset class," the paper said. "Accordingly, suitability of commitment model, as the metric of risk sophistication of investors in AIFs may warrant a review."

 

The proposal says that during the period of adoption of the new metric, the minimum commitment threshold will also continue to exist. The paper also seeks to introduce further relaxations to accredited investors only funds such as it seeks to exempt these schemes from the requirement of maintaining equal set of rights among investors. These funds will also be granted permission to extend the term up to five years provided there is a consensus by two-thirds of the investors by the value in the fund or scheme. 

 

The relaxation also extends to exempting the fund from NISM certification requirement for key investment team of the manager of alternative investment funds which only have accredited investors scheme. The paper also seeks to remove the ceiling for number of investors in a scheme. The propsal also includes passing on the extant responsibilities of trustee to the manager of the scheme,subject to terms of agreement between the two. 

 

"Relaxations proposed to be extended to accredited investors only schemes are also proposed to be extended to large value fund schemes, if not already available," the paper added.  End

 

Reported by Vidhushi RajPurohit

Edited by Akul Nishant Akhoury

 

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