SEBI makes it easier for alternative investment funds to launch new schemes

India’s stock markets regulator SEBI has introduced a green-channel system allowing regular alternative investment fund schemes to be launched 10 working days after their applications are filed, unless it advises otherwise.

SEBI said the Green-Channel: AIF Rollout Upon Document Acknowledgement mechanism, known as GARUDA, was intended to ease and expedite the launch process.

Under the circular, launching a scheme means circulating its Private Placement Memorandum, or PPM, to investors to solicit funds. Filing the document does not amount to regulatory approval.

For an AIF’s first scheme, launch can take place only after Sebi grants registration or 10 working days after the application is filed, whichever is later.

Regular schemes are defined as those other than Accredited Investor-only funds, Large Value Funds for Accredited Investors and Angel Funds.

Their PPMs must be filed through a Sebi-registered merchant banker on the Sebi Intermediary Portal, along with the applicable scheme fee and a signed due-diligence certificate.

The filing must also include fit-and-proper declarations relating to the AIF, its sponsor and manager; declarations concerning the minimum continuing interest commitment; and permanent account number details for the fund, its scheme where available, the sponsor, manager, trustee and specified officials.

SEBI said the merchant banker must “independently exercise due diligence of all the disclosures” in the PPM and assess whether they are accurate and adequate.

The merchant banker appointed to file the document cannot be an associate of the AIF, its sponsor, manager or trustee.

Both the merchant banker and the AIF manager will be responsible for the accuracy and completeness of disclosures and declarations relating to regular schemes. Any irregularity or lapse may result in regulatory action against the entities concerned.

The circular also sets out a simplified filing route for Accredited Investor-only funds, known as AI-only funds or AIOFs, Large Value Funds, or LVFs, and Angel Funds.

AI-only funds and LVFs are exempt from filing their PPMs through merchant bankers and from incorporating Sebi comments before launch. They can launch schemes immediately after filing the PPM with the regulator.

However, the first scheme of an AI-only fund or LVF can be launched only from the date Sebi grants registration.

Angel Funds are also exempt from filing their PPMs through merchant bankers and incorporating Sebi comments. They can circulate their PPMs to investors to solicit funds from the date of registration.

PPMs for AI-only funds, LVFs and Angel Funds must be filed on the Sebi Intermediary Portal with the applicable fee and an undertaking signed and stamped by the CEO of the AIF manager, or a person holding an equivalent position, and the manager’s compliance officer.

The AIF manager will be responsible for ensuring that the disclosures and declarations are accurate, complete and compliant with the regulations.

These funds can also file changes to their PPMs directly with Sebi, without using a merchant banker, provided the filing is accompanied by the prescribed undertaking.

Sebi has introduced naming requirements for new specialised schemes. An AI-only scheme must add “AI only fund” or “AIOF” at the end of its name, while a Large Value Fund scheme must end with “LVF”.

The circular came into force immediately on 30 July 2026 and applies to PPMs filed with Sebi from 14 July 2026, when the Alternative Investment Funds Second Amendment Regulations were notified.