SEBI proposes lighter regulations for AIFs with only Accredited Investors

Consultation Paper dated 08.08.2025

Introduction to the Consultation Paper

The Securities and Exchange Board of India (SEBI) has released a Consultation Paper aimed at gathering feedback from stakeholders on a significant regulatory proposal. The proposal seeks to introduce an alternative category of Alternative Investment Fund (AIF) schemes that would consist exclusively of Accredited Investors (AIs). These funds, referred to as “AI Funds,” would be governed under a lighter-touch regulatory framework compared to standard AIFs.

Rationale for the Proposal

The initiative is driven by the recognition that Accredited Investors, by definition, possess the necessary financial sophistication and risk awareness to participate in complex investment structures. Therefore, imposing the same stringent regulatory requirements applicable to regular AIFs may not be necessary. A lighter compliance burden is expected to encourage greater flexibility in fund structuring and enhance capital mobilisation from high-value investors.

Key Features of AI Funds

One of the central features proposed under this framework is the allowance for AI Funds to extend the term of their schemes by up to five additional years. This extension would be subject to obtaining the consent of two-thirds of investors, calculated by the value of their investment in the fund or scheme. This provision aims to provide flexibility for long-term investment strategies while ensuring investor agreement is prioritised.

Call for Stakeholder Feedback

SEBI has invited comments and suggestions from all stakeholders to refine and finalise this proposal. Feedback will help assess whether the lighter-touch framework effectively balances the need for investor protection with market development goals. Stakeholders are encouraged to provide their views on the operational and governance aspects of AI Funds, including eligibility criteria, compliance requirements, and the process for term extensions.

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