Summary: The SEBI, vide its Consultation Paper dated February 5, 2026, has proposed amendments to the existing AIF Regulations related to the winding up of AIF schemes and the surrender of AIF registrations. The proposal seeks to address challenges faced by AIFs that retain liquidated proceeds beyond the permissible fund life due to pending or anticipated litigation, tax contingencies, or residual operational expenses. The key proposals include (i) permitting AIFs to surrender their registration while retaining funds, with such AIF schemes being designated as inoperative funds, subject to rationalised compliance obligations; (ii) permitting retention of funds for anticipated liabilities, subject to the consent of a super-majority of investors; and (iii) permitting retention of funds for operational expenses for up to 3 (three) years. SEBI has invited public comments on the Consultation Paper until February 26, 2026.Continue Reading SEBI Consultation Paper: Proposed Amendments to AIF Winding-Up and Surrender Framework
RBI notifies restrictions on investments by regulated entities in AIFs’
Summary: In a decisive move to recalibrate institutional investments and fortify the financial ecosystem, the Reserve Bank of India (RBI) has released the RBI (Investment in AIF) Directions, 2025. These comprehensive guidelines overhaul the existing framework governing how regulated entities (REs) such as banks, NBFCs, and other financial institutions allocate capital to Alternative Investment Funds (AIFs). With stricter exposure caps, mandatory provisioning requirements, and sharper focus on investment-linked risk, the Directions signal a more cautious regulatory stance—aimed at mitigating systemic vulnerabilities and curbing potential misuse of AIF structures. This blog unpacks the key provisions, their far-reaching implications, and the strategic shifts mandated for REs.Continue Reading RBI notifies restrictions on investments by regulated entities in AIFs’
AIF Marketing in India: What Fund Managers Must Know
Introduction
Alternative investment funds (“AIF”) being considered an investment avenue for sophisticated investors with high risk-appetite and ticket-size, are subject to certain restraints in their marketing and placement to keep it restricted to the intended investors. The Securities and Exchange Board of India (“SEBI”) (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) define an AIF as[1] “a privately pooled investment vehicle which collects funds from investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors…”. Regulation 11[2] further provides that an “AIF shall raise funds through private placement by issue of information memorandum or placement memorandum, by whatever name called”. Moreover, it has been provided[3] that no scheme of an AIF shall have more than 1000 investors and where an AIF is set-up as a company, the provisions of the Companies Act, 2013 shall apply.[4]Continue Reading AIF Marketing in India: What Fund Managers Must Know
SEBI Order casts Spotlight on Conflicts of Interest of AIFs
Introduction
The Securities and Exchange Board of India (“SEBI”), vide its settlement order dated May 06, 2025 (“Order”), has accepted a settlement application filed by the investment manager (“Manager”) of a real estate fund (“Fund”), sponsored by a related sponsor entity (“Sponsor”), for breach of various provisions of the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”)[1], and the SEBI Master Circular for Alternative Investment Funds, dated May 7, 2024 (“Master Circular”)[2], subject to a payment of INR 36 lakh by the Manager on behalf of itself and the Fund. The Settlement Order emanated from a suo-moto application, seeking settlement of issues pertaining to conflict of interest and non-compliances in operations of the Fund.Continue Reading SEBI Order casts Spotlight on Conflicts of Interest of AIFs
SEBI Proposes to Unlock Listed Debt Markets for Category II AIFs
Introduction
The Securities and Exchange Board of India (“SEBI”), as part of its ongoing regulatory reforms, released a consultation paper on February 7, 2025, seeking public comments to review Regulation 17(a) of the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”). The objective is to enhance investment flexibility for Alternative Investment Funds (“AIFs”), particularly in debt securities, while addressing concerns arising from recent regulatory changes by way of allowing Category II AIFs to make up to 100% of their investment in certain listed debt securities as explained in detail below. As of now, Category II AIFs are allowed to make less than 50% of their investments in listed securities.Continue Reading SEBI Proposes to Unlock Listed Debt Markets for Category II AIFs
SEBI Prescribes Due Diligence Norms for AIFs to Curb Regulatory Circumvention
Introduction
A new set of regulations has been implemented for Alternative Investment Funds (“AIFs”) to exercise “specific due diligence”,[1] with respect to their investors. The aim is to prevent investors from circumventing the extant norms administered by the financial sector regulators. These include:Continue Reading SEBI Prescribes Due Diligence Norms for AIFs to Curb Regulatory Circumvention
The Reserve Bank Of India Mandates Compounding For Issuance Of Partly Paid-Up Units By AIFs Prior To March 14, 2024
The Reserve Bank of India (“RBI”) vide its circular dated May 21, 2024 (“Circular”),[1] has required that issuance of partly paid-up units by Alternative Investment Funds (“AIFs”) to foreign investors prior to March 14, 2024, should be regularised through compounding under Foreign Exchange Management Act, 1999 (“FEMA”). Compounding by RBI is prescribed for the contravention of foreign exchange regulations as per Foreign Exchange (Compounding Proceedings) Rules, 2000, and involve payment of a fees. In many instances, compounding requires payment of a monetary penalty to RBI.Continue Reading The Reserve Bank Of India Mandates Compounding For Issuance Of Partly Paid-Up Units By AIFs Prior To March 14, 2024
SEBI Adjudicates on Pledging of Securities held by Category I AIFs
Background
In a recent order[1] (“Order”), the Securities and Exchange Board of India (“SEBI”) held that a category I alternative investment fund registered with it (“Fund”); its investment manager (“Manager”); and its trustee (“Trustee”), were in violation of certain SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”). Specifically, these violations were with respect to provisions associated with (i) the code of conduct applicable to the Fund, Manager and Trustee; and (ii) provisions related to leverage and borrowings applicable to the Fund.Continue Reading SEBI Adjudicates on Pledging of Securities held by Category I AIFs
SEBI Codifies Norms for Excuse and Exclusion and Direct Plan for Investors
Introduction
The Securities and Exchange Board of India (“SEBI”) vide its circular dated February 05, 2020, had introduced certain disclosure standards by way of a private placement memorandum (“PPM”) template that all SEBI registered Alternative Investment Funds (“AIFs”) were expected to adhere to. The PPM template inter-alia provided for disclosures under the term “Excuse and Exclusion” and “Direct Plan for investors and constituents of fees that may be charged by the AIFs”.Despite the PPM template, SEBI observed certain disclosure-related inconsistencies and lack of transparency. SEBI by way of circulars dated April 10, 2023, updated the regulatory framework by way of new guidelines to bring in consistency related to disclosures in the PPM.Continue Reading SEBI Codifies Norms for Excuse and Exclusion and Direct Plan for Investors
Uniformisation of Late Submission Fee under FEMA: A One Stop Shop?
LSF – The Journey
The uniform ‘late submission fee’ (“LSF”) is a relatively new concept in the Indian exchange control regime. The Foreign Exchange Management Act, 1999 (“FEMA”), as originally introduced by the legislature, did not envisage the concept of LSF. Resolving a delay in reporting of equity or debt transactions under FEMA would necessarily require compounding of offences before the Reserve Bank of India (“RBI”). Given that compounding is not the most time efficient or simple process, it implied that even for insignificant or genuine delays, parties would have to undergo several steps, thus making the system clogged with late filings and filings becoming more cumbersome than they needed to be.Continue Reading Uniformisation of Late Submission Fee under FEMA: A One Stop Shop?