Under the revamped system, the “Subject Matter” of the SEBI communication is now a mandatory field for verification. The system has also been aligned with the Outward Number format generated through SEBI’s E-Office system.

A recipient can verify a SEBI letter, notice or show-cause notice using:

🔹 Outward Number
🔹 Name of the SEBI official issuing the communication
🔹 Date of the letter
🔹 Subject Matter
🔹 Name of the recipient

If the details match SEBI’s records, the system confirms that the communication was issued by SEBI.

⚠️ Important: Verification confirms the issuance/authenticity of the communication — it does not verify the contents of the letter.

For communications issued before September 2026, SEBI has advised recipients to seek confirmation by emailing dnvs@sebi.gov.in.

Why this matters for AIFs and Fund Managers

AIFs and investment managers regularly receive regulatory communications from SEBI. The revamped DNVS provides an additional control for authenticating regulatory correspondence before taking action or recording it in compliance systems.

A practical compliance workflow could include:

Receive SEBI communication → Capture verification details → Authenticate through DNVS → Record verification → Initiate compliance action

SEBI has stated that the Document Number Verification System continues to be available through its website under:

SEBI → Home → Authenticate Document Number Issued by SEBI

📌 Source: SEBI Press Release PR No. 60/2026, October 1, 2026.

#SEBI #AIF #AlternativeInvestmentFunds #AIFCompliance #FundManagement #SEBICompliance #InvestmentManagers #AIFServices #Compliance #PrivateEquity #VentureCapital

The framework is designed to facilitate blended finance and other fund structures, allowing investors with different risk and return preferences to participate in the same scheme.

🔹 What can Fund Managers now structure?

Eligible schemes can issue:

• Senior units
• Junior units
• Subordinate units

Senior units cannot differ in terms of risk, priority of returns or loss absorption, although they may differ in fees, currency and other operational aspects.

Junior or subordinate investors may, subject to the framework:

➡️ Bear portfolio losses beyond their pro-rata share
➡️ Accept lower financial returns
➡️ Accept zero financial returns
➡️ In certain ESG structures, provide grants to the scheme.

🌱 Blended Finance & ESG

The framework specifically provides for grants to ESG Schemes, with aggregate grants capped at 49% of the scheme corpus.

Grants can be linked to a separate class of “social units” or accepted without issuance of such units, subject to appropriate disclosure in the PPM.

Importantly, grants must be separately accounted for in the scheme’s audited annual financial statements, and the FME must maintain a written policy covering their acceptance, administration and deployment.

💰 Minimum investment

For junior/subordinate units:

USD 2 million — standard minimum investment
USD 1 million — for accredited investors
No minimum investment — for grants.

📄 PPM disclosures become critical

The PPM must prominently disclose:

• Rights attached to each class of units
• Distribution waterfalls
• Redemption and winding-up distributions
• Scenarios involving loss of capital
• Additional risks associated with each class
• Applicable conversion milestones and triggers.

What this means for IFSC Fund Managers

The framework creates a regulatory structure for designing funds where different investors can take different levels of risk and return within the same scheme.

For blended finance structures, this can allow concessional/philanthropic capital to absorb greater risk while commercial investors participate through a different class of units.

Effective immediately.

📌 Source: IFSCA Circular — September 25, 2026

The newly specified jurisdictions are:

🇦🇪 UAE
🇸🇬 Singapore
🇦🇺 Australia
🇪🇺 European Union

However, these jurisdictions are subject to an important condition: they must not be identified by FATF as High-Risk Jurisdictions subject to a Call for Action or under Increased Monitoring, or be classified as high-risk by the Central Government for money laundering, terrorist financing or proliferation financing.

A key clarification for IFSC fund managers

IFSCA has also clarified that the term “jurisdiction” refers to the jurisdiction of domicile of the capital market product or service, rather than the jurisdiction where the entity managing that product or service is located.

The amendment is effective immediately from September 18, 2026.

For Fund Management Entities, distributors and other IFSC ecosystem participants, this clarification is relevant when assessing cross-border distribution structures and applicable jurisdictional requirements.

Source: IFSCA Circular dated September 18, 2026.

The Securities and Exchange Board of India (SEBI), at its 215th Board Meeting held on September 24, 2026, approved several regulatory reforms aimed at strengthening investor protection, simplifying compliance, and expanding participation in India’s alternative investment ecosystem.

Among the key decisions are amendments to the SEBI (Alternative Investment Funds) Regulations, 2012, and significant changes to the Accredited Investor framework.

These reforms could influence how AIF managers structure investor onboarding, manage regulatory compliance, and facilitate capital mobilisation.

1. Enhanced Investor Protection Extended to All AIF Structures

One of the most significant AIF-related decisions concerns the extension of investor protection provisions currently applicable to trust-structured AIFs.

What has changed?

Under the existing framework applicable to AIFs constituted as trusts, the Fund Manager or its officers cannot use the trust’s assets to pay for their own losses, damages, or expenses, including costs associated with resolving investor disputes.

SEBI has approved amendments to extend this protection to AIFs of all legal structures, irrespective of the form in which they are established.

Impact on AIFs and Fund Managers

The amendment reinforces the principle that fund assets must be protected from liabilities arising from the personal actions or obligations of fund managers and their officers.

Fund managers should review:

• Fund constitutional documents and governing agreements.

• Indemnity and expense-reimbursement provisions.

• Policies governing the use of fund assets.

• Internal controls for related expenses and investor disputes.

The objective is to ensure consistent investor protection across different AIF structures.

2. Accredited Investor Framework Expanded to Facilitate Capital Formation

SEBI has approved several changes to the Accredited Investor (AccI) framework to simplify accreditation and expand the pool of eligible sophisticated investors.

These changes are particularly relevant for AIF managers targeting high-net-worth individuals, family offices, institutional investors, and overseas investors.

Manager-Led Investor Accreditation

Under the approved framework, AIF Managers will be permitted to accredit investors as an additional and optional route.

The existing accreditation agency route will continue.

This means eligible AIF managers may be able to integrate investor accreditation into their onboarding workflows rather than requiring investors to complete a separate accreditation process through an external agency.

Potential Benefits for AIF Managers

Manager-led accreditation could:

• Reduce duplication in investor verification.

• Streamline investor onboarding.

• Reduce time and administrative costs.

• Improve the integration of accreditation with subscription and KYC workflows.

For fund managers operating multiple investment products, this could create opportunities for a more unified investor onboarding experience.

3. Securities Market Exposure Introduced as an Accreditation Criterion

SEBI has approved securities market exposure as an additional eligibility criterion for Accredited Investor status.

The approved thresholds are:

This provides an additional, digitally verifiable route for qualifying as an Accredited Investor.

Why This Matters for AIFs

The introduction of an investment-exposure criterion may broaden the pool of investors eligible to participate in products designed for sophisticated investors.

AIF managers may benefit from:

• A larger potential accredited investor base.

• More efficient verification using financial data.

• Better targeting of sophisticated investors.

• Reduced dependence on traditional income and net-worth-based assessment alone.

The change may also encourage technology-enabled verification systems that can validate securities market holdings and maintain supporting records.

4. Deemed Accreditation for Non-Residents

SEBI has also approved deemed Accredited Investor status for Persons Resident Outside India, as defined under FEMA, including Foreign Portfolio Investors.

Implications for AIF Fundraising

This measure is intended to ease access for sophisticated overseas investors to eligible Indian securities market products and facilitate foreign capital inflows.

For AIF managers, the development could support:

• More efficient onboarding of eligible overseas investors.

• Expansion of international fundraising initiatives.

• Simplified accreditation-related processes for qualifying non-resident investors.

However, applicable FEMA, tax, AML/KYC, and other regulatory requirements will continue to require careful consideration.

5. LLPs Eligible for Accredited Investor Status

SEBI has approved eligibility for Limited Liability Partnerships (LLPs) to obtain Accredited Investor status where each partner is an Accredited Investor, in line with the existing framework for partnership firms.

This is relevant to investment structures involving family offices, investment partnerships, and professional investment vehicles.

AIF managers may need to consider how this eligibility change affects investor classification and onboarding documentation for LLP-based investors.

6. Three-Year Validity and Portability Within the Same Group

Under the approved framework:

• Accreditation through either the manager-led or Accreditation Agency route will be valid for three years.

• Manager-led accreditation will be portable across AIF, Specialized Investment Fund (SIF), and PMS products within the same group, subject to appropriate safeguards.

Operational Impact

This could reduce repetitive accreditation checks when an investor participates in multiple eligible products managed by the same financial group.

Fund managers operating multiple AIF schemes or diversified investment platforms may benefit from a more consistent investor verification framework.

Appropriate safeguards and implementation requirements will remain important.

7. What AIF Managers Should Prepare For

Although the Board has approved these proposals, the operational framework will depend on the subsequent regulatory amendments, notifications, and implementation directions.

AIF managers should begin evaluating the following areas:

Investor Onboarding Systems

Can your onboarding platform support:

• Manager-led accreditation workflows.

• Securities market exposure verification.

• Accreditation validity tracking.

• Documentation and audit trails.

Fund Documentation

Review whether investor agreements, subscription documents, and internal policies will need updates once the amendments are notified.

Conclusion

SEBI’s September 24, 2026 Board decisions signal continued efforts to modernise India’s alternative investment regulatory framework while strengthening investor protection and facilitating capital formation.

For AIF managers, the proposed Accredited Investor reforms could simplify onboarding, expand access to sophisticated investors, and reduce duplication across investment products.

At the same time, extending investor asset protection across all AIF legal structures reinforces the importance of robust governance and compliance controls.

Under the circular, IFSCA may now consider extending the validity of an expired Placement Memorandum, even where the application for extension is filed after the expiry of its validity period.

Key highlights:

🔹 Expired PPMs can now potentially be extended
FMEs can apply for an extension even after the validity of the Placement Memorandum has expired.

🔹 Extension fees and late fees apply
The application must be accompanied by the prescribed extension fee and late fee, with the fee structure linked to the applicable fee for filing a fresh scheme.

🔹 No material changes permitted
The scheme cannot undergo material changes to its name, investment objective, investment strategy, structure, category or nature. Any such change would require filing a fresh Placement Memorandum.

🔹 Multiple six-month periods may be considered
Where the application is made after a longer period of expiry, IFSCA may grant an extension covering additional six-month blocks, subject to applicable fees.

⚠️ Important: The extension does not prejudice IFSCA’s right to take action for regulatory non-compliance during the period in which the Placement Memorandum remained expired.

This is a significant development for FMEs managing Venture Capital Schemes and Restricted Schemes in IFSC, providing a mechanism to address situations where a PPM has expired while also maintaining regulatory accountability.

📄 Circular: Extension of validity of expired Placement Memorandum – Reg.
Issued by IFSCA on September 11, 2026, with immediate effect.

SEBI has extended the timeline for certain existing Angel Funds to transition to the mandatory Accredited Investor framework.

Under the revised regulatory framework for Angel Funds, SEBI had introduced an Accredited Investor mandate for Angel Funds. Angel Funds registered after September 10, 2025 are required to onboard and offer investment opportunities exclusively to Accredited Investors.

For Angel Funds registered with SEBI on or before September 10, 2025, a transitional period had originally been provided until September 8, 2026.

What has changed?

Based on representations received from the AIF industry, SEBI has now extended the transition timeline until March 31, 2027.

Accordingly, Angel Funds registered on or before September 10, 2025 must comply with the following:

1. Implementation of Accredited Investor mandate

Such Angel Funds must implement the Accredited Investor mandate on or before March 31, 2027.

During the transition period, they must not offer investment opportunities to more than 200 non-Accredited Investors.

2. Contributions from non-Accredited Investors

From April 1, 2027, such Angel Funds will not be permitted to accept contributions for investment in an investee company from non-Accredited Investors.

3. Existing investments remain unaffected

Existing investors may continue to hold investments already made in the Angel Fund in accordance with the terms of the Fund’s PPM and/or other fund documents.

Effective Date

The circular has come into effect immediately. All other provisions of Chapter 8 of the SEBI Master Circular for AIFs remain unchanged.

What does this mean for Angel Fund Managers?

The extension provides existing Angel Funds with additional time to:

• Transition their investor onboarding processes.

• Put in place systems for Accredited Investor verification.

• Review existing investor and contribution structures.

• Update internal compliance and operational processes.

• Prepare for a complete transition to the Accredited Investor framework by March 31, 2027.

Key takeaway: Existing Angel Funds registered on or before September 10, 2025 now have an additional transition period until March 31, 2027 to comply with the Accredited Investor mandate.

The requirement has been introduced with the objective of promoting transparency, facilitating access to relevant information and enhancing investor awareness regarding FMEs and their activities in the IFSC.

Applicability

Under the circular:

• Authorised FMEs and Registered FMEs (Non-Retail) may maintain either an independent official website or a dedicated webpage hosted on the website of their parent, holding or group entity.

• Registered FMEs (Retail) are required to maintain an independent official website dedicated to their fund management activities in the IFSC.

The website or webpage must be publicly accessible, clearly identify the FME by its registered name and IFSCA registration number, and distinctly present its IFSC activities.

Key Disclosures

The website/webpage is required to prominently disclose, among other matters:

• Profile, category of registration and IFSCA registration number of the FME;

• Registered and correspondence addresses and contact details;

• Details of schemes or funds managed from the IFSC;

• Details of the Custodian, Trustee, Fund Administrator and Statutory Auditor, wherever applicable;

• Investor grievance redressal mechanism, Grievance Redressal Officer, escalation matrix and complaint status;

• Principal Officer, Compliance Officer and other key managerial personnel responsible for IFSC operations;

• Applicable statutory, regulatory and other disclosures; and

• Details of material regulatory or enforcement action taken against the FME or its key managerial personnel during the preceding three years.

The website must also carry an appropriate disclaimer clarifying that registration with IFSCA does not constitute approval or endorsement of the FME, its schemes, financial soundness or performance.

Additional Requirements for Retail FMEs

Registered FMEs managing Retail Schemes will be subject to additional disclosure requirements, including Scheme Information Documents, Key Information Documents, periodic portfolio and performance disclosures, benchmark comparisons, NAV, expense-related information, valuation policies, unclaimed redemption amounts, investor education material and the Investor Charter.

Accessibility and Record-Keeping

The prescribed information must be available in English, carry the relevant update date, specify the applicable currency and time zone where relevant, and be made available in downloadable and, where feasible, machine-readable formats for NAV, portfolio and expense-related disclosures.

Such information is required to remain accessible for at least three years from the date of display, including after winding-up of the scheme.

Compliance Timeline

Existing FMEs are required to intimate the URL of their website or webpage to IFSCA at fme-reporting@ifsca.gov.in on or before December 1, 2026. Any subsequent change in the URL is required to be reported through subsequent quarterly filings.

FMEs registered on or after the circular comes into force must comply with these requirements before commencing fund management activities in the IFSC and intimate the website/webpage URL within 30 days of registration.

The circular will come into force from December 1, 2026.

The extension has been provided pursuant to stakeholder representations and is aimed at facilitating a smoother transition for units that had previously obtained ISINs from domestic depositories in India.

Background

IFSCA had earlier issued a circular dated 6 February 2026 prescribing directions for obtaining ISINs from a recognised depository in the IFSC.

Under the earlier framework, units in the IFSC that had already obtained ISINs from domestic depositories in India for securities or other permitted financial products were required to obtain new ISINs from a depository recognised by IFSCA by 31 August 2026.

Extension of the ISIN Transition Timeline

Following representations received from stakeholders, IFSCA has now extended the deadline for completing this transition.

The revised timeline is as follows:

Accordingly, eligible units now have additional time until 31 December 2026 to obtain the required ISINs from a depository recognised by IFSCA.

What This Means for IFSC Units

The extension provides additional time for entities operating within the IFSC to complete the necessary transition from ISINs obtained from domestic Indian depositories to ISINs issued through an IFSCA-recognised depository.

Entities covered by the earlier ISIN Circular should therefore review their existing securities and permitted financial products, assess their current ISIN arrangements, and plan the transition within the revised timeline.

The extension should also provide greater operational flexibility to stakeholders and recognised depositories in completing the transition process in an orderly manner.

Compliance Timeline

The revised deadlines are important from a compliance and operational planning perspective:

31 December 2026
Deadline for the concerned IFSC units to obtain new ISINs from a depository recognised by IFSCA.

31 January 2027
Deadline for the recognised IFSC depository to submit its compliance report to IFSCA confirming completion of the transition process.

Regulatory Context

The circular has been issued by IFSCA in exercise of the powers conferred under Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, read with Regulation 72 of the IFSCA (Market Infrastructure Institutions) Regulations, 2021.

The circular has come into force with immediate effect.

Key Takeaway

The extension of the ISIN transition deadline from 31 August 2026 to 31 December 2026 gives IFSC units additional time to complete the required transition to ISINs issued by recognised depositories within the IFSC framework.

Entities falling within the scope of the February 2026 ISIN Circular should use the extended timeline to ensure that the transition is completed within the revised deadline and that their securities and permitted financial products remain aligned with the applicable IFSC regulatory framework.

Source: IFSCA Circular dated 25 August 2026 – Extension of timeline for obtaining International Securities Identification Numbers (ISINs) from a recognised depository in IFSC.

The International Financial Services Centres Authority (IFSCA) has expanded the certification options available to employees of Fund Management Entities operating in International Financial Services Centres (IFSCs).

Through its circular dated 10 August 2026, IFSCA has specified an additional certification course for the purpose of compliance with the employee certification requirement prescribed under the IFSCA (Fund Management) Regulations, 2025.

Regulatory Background

Regulation 7(6) of the IFSCA (Fund Management) Regulations, 2025 empowers IFSCA to specify certification courses that employees of Fund Management Entities in an IFSC are required to complete.

IFSCA had earlier, through its circular dated 1 April 2026, specified the certificate course titled:

“Regulatory Framework for Fund Management in IFSC: AIFs and Retail Schemes”

offered by the Institute of Company Secretaries of India (ICSI) for this purpose.

The latest circular now introduces an additional certification option.

ICAI Certification Course Recognised

IFSCA has specified the certificate course titled:

“Regulatory Framework for Fund Management in IFSC”

offered by the Institute of Chartered Accountants of India (ICAI) under Regulation 7(6) of the Fund Management Regulations, 2025.

This provides Fund Management Entities and their employees with an alternative professional certification route for meeting the regulatory requirement.

Either Certification Course Will Satisfy the Requirement

Importantly, IFSCA has clarified that successful completion of any one of the two specified certificate courses will be considered sufficient for compliance with Regulation 7(6).

Accordingly, employees may satisfy the applicable certification requirement by successfully completing either:

1. ICSI – “Regulatory Framework for Fund Management in IFSC: AIFs and Retail Schemes”; or

2. ICAI – “Regulatory Framework for Fund Management in IFSC”.

The circular therefore does not replace the earlier ICSI certification. Instead, it adds the ICAI course as an alternative.

Implications for Fund Management Entities

The clarification is relevant for Fund Management Entities establishing or operating fund management activities within an IFSC.

By recognising certification courses offered by both ICSI and ICAI, IFSCA has provided greater flexibility in meeting the prescribed employee certification requirement.

Fund Management Entities should accordingly review their internal compliance and employee certification processes to determine which of the two specified courses is appropriate for their relevant personnel.

The circular also expressly provides that all other provisions of the earlier circular dated 1 April 2026 remain unchanged.

Effective Immediately

The circular has been issued under the relevant provisions of the International Financial Services Centres Authority Act, 2019 and the IFSCA (Fund Management) Regulations, 2025.

It comes into force with immediate effect.

Key Takeaway

The 10 August 2026 circular represents a straightforward but important compliance clarification for Fund Management Entities in IFSCs.

IFSCA has now recognised two certification routes for the purposes of Regulation 7(6) of the Fund Management Regulations, 2025 — one offered by ICSI and the newly specified course offered by ICAI. Completion of either course will be sufficient to meet the certification requirement.

Fund managers should ensure that their employee compliance frameworks are updated accordingly and that relevant personnel complete one of the specified certification courses.

Source: IFSCA Circular No. F. No. IFSCA-PLNP/80/2024-Capital Markets/10082026 dated 10 August 2026.

The Circular, issued by the Department of Policy and Legal Affairs, emphasises that a valid Letter of Approval (LoA) issued under the Special Economic Zones Act, 2005 is a prerequisite for an entity to obtain registration, licence, recognition, authorisation, permission, approval or any equivalent regulatory instrument from IFSCA and to undertake permissible activities in the IFSC.

Validity of Letter of Approval

The Circular reiterates the applicable validity periods for an LoA. Where an entity has not commenced business, the LoA remains valid for a period of one year. Where the entity has commenced business, the LoA remains valid for a period of five years.

Further, an application for renewal of the LoA is required to be filed with the Administrator (IFSCA) at least two months prior to its expiry, in accordance with Rule 19(6A) of the Special Economic Zones Rules, 2006.

The Circular also clarifies that regulatory instruments issued to a regulated entity may either be perpetual or remain valid only for the specified period mentioned in the respective instrument.

IFSCA’s Direction to Regulated Entities

IFSCA has observed that certain regulated entities have continued to undertake business activities in the IFSC without holding valid and subsisting LoAs and/or applicable regulatory instruments.

In view of this, all regulated entities have been directed to ensure, at all times, that they:

• hold a valid and subsisting Letter of Approval and applicable Regulatory Instrument(s); and

• do not undertake any business activities without holding the requisite valid and subsisting approvals and regulatory instruments.

This direction places particular emphasis on the continued validity of regulatory approvals, rather than treating regulatory authorisation as a one-time requirement.

Consequences of Non-Compliance

IFSCA has advised regulated entities to ensure strict compliance with the Circular in order to avoid operational disruptions and regulatory sanctions.

Any breach may constitute a violation of the relevant provisions of the International Financial Services Centres Authority Act, 2019, the Special Economic Zones Act, 2005, and the rules or regulations made thereunder.

Depending on the applicable provisions, enforcement action may include financial penalties, suspension or cancellation of regulatory instruments, in addition to other appropriate penal or enforcement measures.

Immediate Effect

The Circular has been issued in exercise of the powers conferred under Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019. It comes into force with immediate effect and supersedes the earlier Circular titled “Direction for all Regulated Entities” dated 3 April 2025.

Conclusion

The latest direction serves as an important reminder to IFSC-regulated entities of the need to maintain continuous oversight of the validity of their LoA and other applicable regulatory instruments. Entities operating in the IFSC should accordingly ensure timely renewal of their approvals and refrain from undertaking regulated activities where the requisite authorisations are no longer valid.

Source: IFSCA Circular dated 10 August 2026 – Directions to all Regulated Entities.

For AIFs, this is particularly relevant because AIFs are expressly included among the entities covered by the circular.

What changes?

🔹 6-hour reporting: Cyber incidents must be reported to SEBI through the prescribed email channel within 6 hours.

🔹 24-hour portal reporting: The incident must also be reported through SEBI’s Cyber Incident Reporting Portal within 24 hours.

🔹 FIRE-based reporting: SEBI’s portal is now aligned with the FSB FIRE framework, introducing common information fields, standardised definitions and consistent incident classifications.

🔹 Reporting is ongoing: Reporting is not simply a one-time exercise. The portal supports initial reporting, subsequent updates and final closure as the incident progresses.

What does this mean for AIF Managers?

AIFs and their technology/service providers should ensure that there is a clear cyber-incident response and reporting workflow, with defined ownership, escalation mechanisms and the ability to capture the information required for SEBI reporting within the prescribed timelines.

The circular also requires regulated entities to put systems in place for implementation and to consider necessary changes to relevant rules, regulations or bye-laws where applicable.

For AIFs, cybersecurity is no longer only an IT issue — it is a regulatory reporting and governance issue.

SEBI has taken an important step towards simplifying KYC processes for financial entities operating in GIFT City.

Through its circular dated August 20, 2026, SEBI has formally specified the International Financial Services Centres Authority (IFSCA) under Regulation 16A(1) of the SEBI KYC Registration Agency (KRA) Regulations, 2011.

This enables entities regulated by IFSCA to access the systems of SEBI-registered KYC Registration Agencies (KRAs) for undertaking KYC of their clients.

What has SEBI changed?

Regulation 16A(1) of the SEBI KRA Regulations allows entities regulated by other financial-sector regulators, when specified by SEBI, to access KRA systems for undertaking KYC of their clients.

SEBI has now specifically included IFSCA within this framework.

The immediate effect is that there can now be interoperability and information sharing between:

SEBI-registered KRAs ↔ IFSCA-regulated entities

This is particularly relevant for the growing ecosystem of funds, investment managers, financial institutions and other regulated entities operating from GIFT City / IFSC.

What does this mean for GIFT City investors?

An IFSCA-regulated entity can potentially use information already maintained within the SEBI KRA ecosystem when undertaking KYC of its clients.

This is significant because KYC information does not necessarily need to be treated as an entirely separate data set merely because the financial service is being provided from an IFSC.

For businesses building onboarding infrastructure for GIFT City, this creates the foundation for a more connected KYC workflow between the domestic securities-market KRA ecosystem and the IFSC ecosystem.

What about KYC compliance?

The circular is not simply an access permission.

SEBI has specifically stated that entities accessing the KRA system will be subject to the applicable provisions of the SEBI KRA Regulations. They must also follow SEBI’s Master Circular on Know Your Client (KYC) norms for the securities market, as amended from time to time.

Therefore, access to KRA data comes with corresponding compliance responsibilities.

For clients registered as Foreign Portfolio Investors (FPIs), additional data-security requirements under SEBI’s Master Circular dated May 30, 2024, also apply.

Why this matters for AIFs and fund managers

The development is particularly relevant for fund managers and investment platforms that operate across India and GIFT City.

A typical onboarding ecosystem may involve:

Investor → Fund / Manager → KYC → KRA → AML / Compliance → Investment

With the new framework, an IFSCA-regulated entity can be connected to the existing SEBI KRA infrastructure rather than operating in complete isolation.

This could help reduce:

• Repetitive KYC data collection

• Manual verification

• Duplicate onboarding processes

• Friction when investors move between regulated financial services

• Operational complexity for fund administrators and compliance teams

However, the circular itself establishes the regulatory interoperability framework. It does not prescribe a particular API, commercial arrangement, onboarding process or technical implementation between an IFSCA-regulated entity and a particular KRA.

Those implementation details will therefore remain important for firms building actual onboarding workflows.

A bigger implication for GIFT City

This circular is more than a technical KYC change.

One of the challenges in building GIFT City into a globally competitive financial centre is ensuring that regulated financial infrastructure can interact efficiently with India’s existing financial ecosystem.

Allowing IFSCA-regulated entities to access SEBI KRA systems is a step towards that interoperability.

For fintech and fund-operations platforms, it also opens up the possibility of building a single KYC workflow spanning SEBI-regulated and IFSCA-regulated businesses, subject to the applicable regulatory and access requirements.

Effective immediately

SEBI has stated that the circular comes into force with immediate effect.

The takeaway

SEBI has effectively created the regulatory bridge for KRA information sharing between India’s SEBI-regulated KYC ecosystem and entities regulated by IFSCA.

For GIFT City funds, investment managers and financial institutions, the next important question is no longer just whether KRA information can be accessed — but how the operational and technical connectivity will be implemented in practice.

This could become an important building block for streamlined investor onboarding in the IFSC ecosystem.

Source: SEBI Circular HO/38/15/(7)2026-MIRSD-POD/I/19255/2026 dated August 20, 2026.

SEBI has taken another step towards simplifying and digitising the onboarding of Foreign Portfolio Investors (FPIs).

Through its circular dated August 20, 2026, SEBI has permitted FPIs to execute a Power of Attorney (PoA) in favour of their custodians using a digital signature, in accordance with the Information Technology Act, 2000.

The change removes the requirement for such digitally executed PoAs to undergo notarisation, apostillisation or consularisation.

What has changed?

Under the earlier requirement, the Power of Attorney given by an FPI to its custodian, specifying the address, was required to be duly notarised and/or apostilled or consularised.

SEBI has now modified this requirement to provide an additional route:

A Power of Attorney given by an FPI to its custodian specifying the address may be executed using a digital signature in accordance with the Information Technology Act, 2000.

The existing notarised/apostilled/consularised route continues to be available. The new digitally signed route is therefore an additional option, rather than a replacement of the existing process.

Why is this important?

The change is aimed at making FPI onboarding faster and more digital.

Cross-border execution of legal documents can often involve additional steps such as:

• Notarisation

• Apostillisation

• Consularisation

• Physical document movement

• Coordination with overseas legal professionals

SEBI has specifically stated that the change will eliminate the need for notarisation, apostillisation or consularisation of the Power of Attorney, thereby reducing the overall time involved in FPI onboarding and improving ease of doing business for FPI applicants.

Part of SEBI’s broader FPI digitisation journey

The circular places this change within SEBI’s broader effort to streamline and digitise the FPI registration process.

SEBI has previously introduced measures including:

• The Common Application Form (CAF) for FPI registration

• PAN, bank and demat account processes

• Use of Indian digital signatures for CAF and other registration documents

• Digital signature functionality within the CAF portal

• Registration based on scanned copies of documents

The digitally signed PoA is another step in that progression.

Effective from August 20, 2026

The circular is effective immediately from August 20, 2026.

It modifies Para 9(B)(iv) of Part B of the FPI Master Circular relating to the Power of Attorney given by an FPI to its custodian.

What does this mean for FPI onboarding?

For an FPI choosing to use the digital route, the process can now be significantly more streamlined:

FPI → Digitally signs PoA → Custodian → FPI onboarding

Instead of:

FPI → Notarisation → Apostille/Consularisation → Physical/document processing → Custodian

This should be particularly relevant for overseas investors seeking to enter the Indian securities market without the administrative delays associated with execution and legalisation of physical documents.

What intermediaries should note

The circular is addressed not only to FPIs but also to:

• Designated Depository Participants (DDPs)

• Custodians

• Registrars and Transfer Agents

• Depositories

• Stock Exchanges and Clearing Corporations

• SEBI-registered intermediaries

Accordingly, onboarding workflows and document checklists maintained by relevant intermediaries should account for the newly permitted digitally signed PoA route.

A small regulatory change with a meaningful operational impact

The circular is only two pages long, but its operational impact is straightforward: SEBI is continuing to move FPI onboarding away from physical and jurisdiction-specific document formalities towards digitally executable documentation.

For global investors, this can reduce turnaround time and administrative friction.

For custodians and onboarding platforms, it also means that digital signature verification and document workflow capabilities become increasingly important components of the FPI onboarding stack.

Key takeaway

SEBI has not abolished the traditional notarisation/apostille route. It has added a digitally signed PoA route as an alternative.

Effective August 20, 2026, an FPI can provide a Power of Attorney to its custodian, specifying the address, executed using a digital signature compliant with the Information Technology Act, 2000.

This is another incremental but important step towards fully digital, faster and more frictionless foreign investor onboarding in India.

Source: SEBI Circular HO/19/34/14(8)2026-AFD-POD2/I/19251/2026 dated August 20, 2026.

The proposed framework could make it substantially easier for overseas investors to complete KYC and participate in India’s securities market without having to be physically present in India.

For Indian Alternative Investment Funds (AIFs), the proposal could have an important operational impact, particularly when onboarding overseas Limited Partners (LPs).

What Has SEBI Proposed?

SEBI issued a consultation paper on 14 August 2026 titled “Review of Know Your Client process for individual Persons Resident Outside India.”

The consultation paper proposes allowing individual Persons Resident Outside India (PROIs) to complete digital KYC while located outside India, provided they are in a FATF-compliant country.

Currently, digital onboarding of non-resident clients requires the client to be physically present in India. This has created significant friction for overseas investors, who may otherwise have to rely on physical documentation, courier services, notarisation and other offline processes.

SEBI is now proposing to remove this India-presence requirement for eligible PROI clients.

Who Does the Proposal Cover?

For the purpose of the consultation paper, individual PROI clients include:

• Non-Resident Indians (NRIs)

• Overseas Citizens of India (OCIs)

• Foreign nationals located outside India

The proposal is specifically focused on simplifying their KYC and digital onboarding process.

Foreign nationals seeking registration as a Foreign Portfolio Investor (FPI) would continue to be governed by the applicable FPI framework.

What Will Change Under the Proposed Framework?

1. Digital KYC From Outside India

The most significant proposed change is that an eligible PROI investor would no longer need to be physically present in India to complete digital KYC.

The intermediary would be permitted to accept KYC records and related documents digitally from a client located in a FATF-compliant country.

This could remove one of the biggest barriers to fully digital onboarding of overseas investors.

2. Electronic Signing of KYC Documents

The proposal allows the KYC form to be submitted through physical or digital channels.

The intermediary could accept:

• An original physical KYC form

• A scanned copy of a physical form under electronic signature

• A digital KYC form under electronic signature

For specimen signatures, the investor could provide a cropped image of the signature electronically. During Video In-Person Verification (VIPV), the investor would then provide a wet signature, which the intermediary would verify against the submitted specimen signature.

3. Video In-Person Verification From Overseas

SEBI proposes allowing Video In-Person Verification (VIPV) for PROI clients located outside India.

However, this would not simply be a standard video call.

The proposed process includes several safeguards, including:

• Client consent recorded in an auditable and alteration-proof manner

• Random actions to establish that the interaction is live

• Live GPS coordinates and timestamp

• Protection against spoofed IP addresses, VPNs and proxy servers

• Clear capture of the client’s photograph

• Face-liveness and spoof detection

• End-to-end encryption

• Verification by an authorised official of the intermediary

• Concurrent audit of the VIPV process

The client’s IP address would also need to originate from India or a FATF-compliant country and correspond with the country declared in the KYC documentation.

4. Greater Flexibility Around Overseas Addresses

The proposal also addresses the practical difficulty of verifying the current overseas address of a PROI.

Where an officially valid document can be verified through an official or source database, but the investor wants to provide a different current address, the investor may be permitted to provide a self-declaration of the current address.

This could simplify onboarding where the address on a passport or other officially valid document is not the investor’s current residential address.

5. Foreign Mobile Numbers

Verification of foreign mobile numbers can be difficult and costly for intermediaries, particularly where OTP-based verification is involved.

Under the proposed framework, the intermediary would collect the investor’s mobile number and email address. The mobile number would be verified if feasible, while the email address would also be verified through OTP or another verifiable mechanism.

This is particularly relevant for overseas investors who do not maintain an Indian mobile number.

KYC Portability Could Become Much More Important

Another important proposal relates to KYC portability.

SEBI proposes that KYC records for individual PROIs should be treated as portable.

Individual attributes within the KYC record would be tagged as “validated” where they have been verified against official or source databases.

This could reduce the need for an overseas investor to repeatedly submit the same KYC information when approaching different intermediaries.

For investors who interact with multiple financial institutions, brokers, fund managers or other regulated intermediaries, this could significantly reduce repetitive onboarding.

Greater Reliance on Existing KYC

The proposed framework would also allow an intermediary to rely on KYC undertaken by:

• Another SEBI-registered intermediary; or

• An entity regulated by another financial-sector regulator,

based on records obtained through the KRA/CKYCRR framework.

However, the intermediary would continue to have ultimate responsibility for the KYC of its own clients and would be required to undertake enhanced KYC measures where appropriate based on the client’s risk profile.

What Does This Mean for AIFs?

This proposal could be particularly relevant for India’s AIF industry.

Indian AIFs regularly onboard investors who are based outside India, including NRIs, OCIs and other eligible foreign investors.

Historically, overseas investor onboarding can involve multiple steps, including:

KYC documentation → notarisation/certification → courier → document verification → IPV → KRA registration → AML checks → subscription documentation

The proposed framework could allow much of this process to move towards a completely digital workflow.

For an AIF manager, the future onboarding journey could look more like:

Investor Registration → PAN/Passport → Digital KYC → Electronic Signature → Address Verification → FATF Country Check → VIPV → Liveness/Anti-Spoofing → AML Screening → KRA/CKYCRR → Subscription Documentation → Investor Onboarded

This could significantly reduce onboarding time and operational friction for overseas LPs.

What AIF Managers Should Prepare For

Although the proposal is not yet a final regulatory requirement, AIF managers and fund administrators should start evaluating whether their investor onboarding infrastructure can support the proposed model.

Key areas include:

1. Digital Overseas KYC

The onboarding platform should be capable of collecting KYC information and supporting documents digitally from investors located outside India.

2. FATF Country Screening

The investor’s country of residence would become an important part of the onboarding decision.

3. Video KYC / VIPV

A robust VIPV workflow will need to support liveness detection, GPS capture, anti-spoofing and appropriate audit trails.

4. KRA and CKYCRR Integration

The proposed portability framework makes integration with KRA and CKYCRR increasingly important for efficient investor onboarding.

5. AML and Risk Assessment

Digital onboarding does not remove the intermediary’s responsibility for KYC, AML or risk-based due diligence.

The proposed framework specifically retains the intermediary’s ultimate responsibility for KYC and allows enhanced KYC measures based on the investor’s risk profile.

6. Cybersecurity and Auditability

SEBI’s draft framework states that the infrastructure used for KYC must comply with the Cyber Security and Cyber Resilience Framework (CSCRF) applicable to SEBI-regulated entities.

Therefore, digital KYC should not be treated simply as a front-end video onboarding feature. The underlying infrastructure, security controls, audit logs and data protection mechanisms will also be important.

Why This Matters for the Indian AIF Ecosystem

The proposed changes come at a time when India’s investment ecosystem is becoming increasingly global.

Indian fund managers increasingly interact with investors who may be based in the US, UK, Singapore, UAE, Europe and other jurisdictions.

For these investors, the ability to complete KYC digitally from their country of residence could remove a significant operational barrier.

For AIF managers, this could mean:

• Faster LP onboarding

• Lower documentation and courier costs

• Less manual intervention

• Better investor experience

• Greater KYC portability

• More efficient fund administration

• A more scalable digital onboarding process

The change could therefore be more than just a KYC simplification. It could contribute to the broader digitisation of India’s private capital ecosystem.

What Happens Next?

This is currently a SEBI consultation paper and proposed framework, not a final regulatory requirement.

SEBI has invited public comments on the proposal, including whether digital onboarding should be permitted for PROI clients located in FATF-compliant countries and whether additional safeguards should be introduced for VIPV.

The deadline for submitting comments is 4 September 2026.

Once the final circular is issued, the proposed framework states that the provisions would come into effect 30 days after the date of issue.

Conclusion

SEBI’s proposal to simplify KYC for NRIs, OCIs and foreign nationals could materially improve the experience of overseas investors participating in India’s securities market.

For AIFs, the potential impact is particularly significant.

If implemented substantially as proposed, fund managers could move towards a more seamless digital LP onboarding experience, combining KYC, document verification, video verification, AML screening, KRA/CKYCRR checks and subscription documentation into a single technology-enabled workflow.

For an industry increasingly dependent on global capital, this is a welcome step towards making India’s private investment ecosystem easier to access from anywhere in the world.

AIF managers, fund administrators and technology providers should closely monitor the final SEBI circular and begin evaluating their existing investor onboarding processes against the proposed framework.

Disclaimer: This article is based on SEBI’s consultation paper dated 14 August 2026 and describes proposals that are subject to the consultation process. It should not be treated as legal or regulatory advice.

Source: Securities and Exchange Board of India (SEBI), Consultation Paper – Review of Know Your Client process for individual Persons Resident Outside India, issued 14 August 2026.

Source: https://www.sebi.gov.in/reports-and-statistics/reports/aug-2026/consultation-paper-on-review-of-accredited-investor-framework_103550.html

SEBI’s latest Consultation Paper on the Review of the Accredited Investor (AI) Framework could significantly change how Accredited Investors are identified and onboarded in India.

And, frankly, the biggest change is not just about thresholds.

It is about who gets to decide whether an investor is an Accredited Investor.

Under the existing framework, an investor generally approaches an independent Accreditation Agency, gets their financial eligibility verified, obtains an Accreditation Certificate, and then approaches the relevant fund manager or intermediary.

SEBI is now proposing a much more streamlined approach.

The Big Change: Fund Managers May Be Able to Accredit Investors

SEBI has proposed allowing the Manager of an investment product to determine and record an investor’s Accredited Investor status as part of the onboarding process.

In other words, the investor may no longer need to separately complete the accreditation journey with an Accreditation Agency before approaching the fund manager.

For the same manager or group, the proposed accreditation could remain valid for three years.

For products offered by different managers, accreditation would be undertaken when the investor is onboarded by each manager.

This is a fairly fundamental shift.

The existing framework was deliberately built around independent verification, precisely because Accredited Investor status can unlock regulatory flexibilities. SEBI itself acknowledges that allowing the Manager to determine AI status creates potential conflicts of interest and therefore proposes safeguards such as record keeping, audit, accountability and conflict-of-interest policies.

Importantly, SEBI is not proposing to eliminate the Accreditation Agency route.

The existing route would continue alongside the proposed Manager-led route, giving investors a choice between portability and convenience.

But Here Is the More Interesting Question: Who Actually Becomes an Angel Investor?

This is where the conversation gets interesting.

The existing AI framework has relatively high financial eligibility thresholds.

For an individual/HUF/family trust/sole proprietorship, the current criteria include:

• Annual income of at least ₹2 crore, OR

• Net worth of at least ₹7.5 crore, including at least ₹3.75 crore in financial assets, OR

• Annual income of at least ₹1 crore and net worth of at least ₹5 crore, including at least ₹2.5 crore in financial assets.

For many aspiring angel investors, these are substantial thresholds.

So while simplifying the accreditation process is useful, simplification does not automatically mean democratisation.

SEBI appears to recognise this issue.

The consultation paper notes that the Accredited Investor population was only 3,820 as of July 31, 2026, although this had increased sharply from 649 a year earlier.

That is still a tiny pool compared with the potential universe of investors in India.

The Potential Game Changer: Securities Market Assets

SEBI has proposed a new eligibility route based purely on securities market assets.

Under the proposal:

Individual investor: ₹5 crore or more of securities market assets

Body corporate: ₹20 crore or more of securities market assets.

The assets considered include securities such as equity, debt, REITs/InvITs, AIF units, mutual funds, certain futures positions, unlisted securities held in demat form and overseas securities market investments.

The logic is interesting.

Instead of asking an investor to repeatedly produce extensive financial documentation, securities-market holdings can potentially be verified digitally through e-CAS and broker statements.

That could make accreditation substantially more efficient.

SEBI’s Own Data Shows Why This Matters

SEBI estimates that, based on the proposed ₹5 crore securities-market-assets threshold, approximately 3.7 lakh investors could potentially become eligible for accreditation.

That compares with approximately 96,000 existing AIF investors.

That is a potentially enormous expansion of the Accredited Investor universe.

And this is where the proposal becomes much more interesting for the AIF ecosystem.

More eligible investors → more potential AIF investors → potentially more risk capital.

But there is an important caveat:

Eligible does not mean active.

Having ₹5 crore in securities does not automatically mean someone wants to become an angel investor, invest in private companies, or take venture-style risk.

The proposal may therefore solve a regulatory access problem, but it does not by itself solve the investor participation problem.

So Has SEBI “Fixed” Accredited Investor Accreditation?

Not yet.

But SEBI has clearly identified the friction points.

The consultation paper specifically records industry concerns around:

• duplication between Accreditation Agencies and fund managers;

• limited validity;

• limited number of Accreditation Agencies;

• high accreditation costs;

• reliance on financial documentation;

• digital verification of financial information; and

• expanding the universe of eligible investors.

The proposed framework directly attacks several of these issues.

The direction is clear:

Less paperwork.
More digital verification.
Manager-led onboarding.
Longer validity.
A potentially much larger AI universe.

What Could This Mean for AIF Managers?

If the proposal is eventually implemented broadly along these lines, Accredited Investor onboarding could become much closer to a normal digital KYC/onboarding workflow.

Instead of:

Investor → Accreditation Agency → Verification → Accreditation Certificate → Fund Manager → Verification Again → Investment

the proposed Manager-led model could look more like:

Investor → Fund Manager → Eligibility Verification → AI Status → Investment

with appropriate records, controls, audit and accountability.

That is a significant operational change.

And it creates an interesting opportunity for the industry:

Accreditation could increasingly become an embedded part of the investment onboarding infrastructure rather than a separate administrative process.

But There Is Still a Big Question

The central question is not whether the process becomes easier.

It is:

How far should India lower the friction around access to sophisticated investment products without lowering the standard for investor sophistication?

SEBI’s own consultation paper highlights this tension.

The AI framework exists because Accredited Investors receive access to products and regulatory flexibilities that may involve greater complexity, lower liquidity or reduced regulatory oversight.

So the challenge is to make accreditation easy enough to use, but credible enough to mean something.

That balance will determine whether the new framework actually works.

Our View

SEBI’s proposal is directionally positive.

The Manager-led accreditation model could remove a major operational bottleneck.

The ₹5 crore securities-market-assets route could dramatically expand the eligible investor universe.

And digital verification could make the entire process faster, cheaper and more scalable.

But if the objective is to genuinely deepen India’s angel and private-market ecosystem, accreditation reform is only one piece of the puzzle.

The next question is much bigger:

Can India create a framework where a much larger pool of financially sophisticated investors can participate in AIFs, angel investing and private markets — without compromising investor protection?

That is the real test of this consultation.

One Important Caveat

This is currently a SEBI consultation paper, not the final regulatory framework.

SEBI has invited public comments on Proposals 1–10 until September 3, 2026. The final regulations may therefore differ from the proposals discussed above.

On 3 August 2026, the International Financial Services Centres Authority (IFSCA) issued a circular introducing important amendments to the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022. These changes are applicable to all regulated entities operating in IFSCs, including Fund Management Entities (FMEs), banking units, intermediaries, and other regulated financial institutions.

The amendments primarily strengthen FIU reporting requirements and clarify the conditions for digital onboarding of Non-Resident Indian (NRI) customers.

Key Changes

1. Rule 8 Added Alongside Rule 7

The Guidelines have been amended to reference Rule 8 in addition to Rule 7 under the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, expanding the regulatory framework applicable to reporting entities.

2. FIU Reporting Must Be Done Through FINgate 2.0

IFSCA has clarified that:

• User manuals and reporting formats are available on the FIU-India website.

• All AML reports must now be filed online through the FINgate 2.0 portal.

This reinforces the move towards standardized electronic regulatory reporting.

3. Cross Border Wire Transfer Reports (CBWTR) Added

One of the most significant changes is the inclusion of Cross Border Wire Transfer Reports (CBWTRs) alongside existing reporting obligations.

The amendments insert CBWTR requirements into the guidance relating to regulatory reporting, meaning regulated entities should review whether their AML systems are capable of generating and submitting these reports where applicable.

4. Updated Countries Allowed for NRI Digital Onboarding

IFSCA has updated the jurisdictions from which NRI customers may complete Video KYC (V-CIP), subject to other regulatory conditions.

The approved jurisdictions are:

• United States

• Japan

• South Korea

• United Kingdom (excluding British Overseas Territories)

• Canada

• UAE

• Singapore

• Australia

• European Union

Additionally, these jurisdictions must not be identified by FATF as High-Risk Jurisdictions or Jurisdictions under Increased Monitoring, nor designated by the Government of India as high-risk for money laundering, terrorist financing, or proliferation financing.

The same list has also been incorporated into the V-CIP onboarding conditions for low-risk NRI customers.

Impact on IFSC Fund Managers

Fund Management Entities and other IFSC regulated entities should consider the following actions:

• Review AML reporting workflows to ensure compatibility with FINgate 2.0.

• Evaluate whether CBWTR reporting needs to be incorporated into internal compliance processes.

• Update digital onboarding policies for NRI investors.

• Verify that V-CIP controls reflect the revised list of permitted jurisdictions.

• Ensure AML and KYC technology platforms are updated to comply with the amended Guidelines.

What’s changed?

• New deadline: 31 October 2026

• Circular: https://www.sebi.gov.in/legal/circulars/jul-2026/extension-of-timelines-with-repect-to-compliance-of-digital-accessibility-circulars-_103277.html

• The extension applies only to:

  • Conducting the accessibility audit, and

  • Remediating findings from the audit.

• All other requirements under SEBI’s Digital Accessibility Circulars continue to remain applicable without any change.

Who does this impact?

All SEBI-regulated entities, including:

• Alternative Investment Funds (AIFs)

• Portfolio Managers

• Investment Advisers

• Mutual Funds

• Stock Brokers

• Depositories

• Other SEBI intermediaries

What should AIFs do now?

Rather than treating this as a postponement, use the additional time to:

• Conduct a comprehensive accessibility audit.

• Fix WCAG compliance issues across investor-facing portals.

• Validate documents, forms, and workflows for accessibility.

• Prepare evidence for regulatory review.

Accessibility compliance is becoming a core governance expectation—not just a technology exercise.

The Securities and Exchange Board of India (SEBI) has introduced the Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism, marking one of the most significant operational reforms for Alternative Investment Funds (AIFs) in recent years.

The objective is simple: reduce the time taken to launch AIF schemes while maintaining accountability through Merchant Banker due diligence and manager certifications. The mechanism follows SEBI’s consultation process initiated in May 2026 and is now effective through the July 30, 2026 circular.

What is GARUDA?

GARUDA replaces the traditional review-heavy process with a Green Channel model where eligible AIF schemes can proceed with launch after filing the Placement Memorandum (PPM), subject to specified conditions.

Rather than SEBI reviewing every PPM before launch, greater responsibility is placed on:

• SEBI-registered Merchant Bankers

• AIF Managers

• Compliance Officers

The move is expected to significantly reduce fund launch timelines and enable faster capital deployment.

Timeline for Regular AIF Schemes

For Regular AIF Schemes (i.e., schemes other than AI-only Funds, Large Value Funds and Angel Funds):

New launch timeline

A scheme may be launched:

• 10 working days after filing the PPM with SEBI, unless SEBI advises otherwise.

For the first scheme of a newly registered AIF:

• Launch can occur only after:

  • SEBI registration has been granted, or

  • 10 working days from filing,

whichever is later.

This replaces the earlier, longer review process and provides much greater certainty around launch timelines.

Merchant Banker Plays a Central Role

The GARUDA framework significantly enhances the responsibility of the Merchant Banker.

The Merchant Banker must:

• Independently conduct due diligence of the PPM

• Verify the accuracy and adequacy of disclosures

• Submit a Due Diligence Certificate

• Be independent and not associated with the AIF, Sponsor, Manager or Trustee

The Merchant Banker’s details must also be disclosed in the Placement Memorandum.

Documents Required While Filing the PPM

Regular schemes must submit the following along with the PPM:

• Merchant Banker Due Diligence Certificate

• Fit & Proper declarations

• Sponsor/Manager minimum continuing interest declaration

• PAN details of:

  • AIF

  • Scheme (if available)

  • Sponsor

  • Manager

  • Trustee

  • Directors/Partners

  • Key investment team members

Immediate Launch for AI-only Funds, LVFs and Angel Funds

SEBI has introduced even greater relaxations for:

• Accredited Investor Only Funds (AI-only Funds)

• Large Value Funds (LVFs)

• Angel Funds

AI-only Funds and LVFs

These funds:

• Do not require Merchant Banker filing

• Can launch immediately upon filing the PPM with SEBI

• May launch their first scheme immediately after SEBI registration

Angel Funds

Angel Funds also receive similar treatment.

They:

• Are exempt from Merchant Banker filing

• May circulate the PPM immediately after obtaining SEBI registration

CEO and Compliance Officer Undertaking

Instead of a Merchant Banker certificate, AI-only Funds, LVFs and Angel Funds must submit a jointly signed undertaking from:

• Chief Executive Officer (or equivalent)

• Compliance Officer

confirming the accuracy and completeness of disclosures made in the Placement Memorandum.

SEBI Has Not Approved Your PPM

One important clarification under GARUDA is that:

Submission of the PPM should not be interpreted as SEBI approval.

The circular expressly states that SEBI:

• Does not certify the correctness of disclosures

• Does not guarantee the Manager’s capability

• Places responsibility on the Manager and Merchant Banker for disclosure quality

Any incorrect, misleading or incomplete disclosures may result in regulatory action.

New Naming Requirements

SEBI has also prescribed naming conventions.

New schemes must include:

• “AI only Fund” or “AIOF” for Accredited Investor Only Funds

• “LVF” for Large Value Funds

What Does “Launch” Mean?

SEBI has clarified that the launch of an AIF scheme means:

Circulation of the Placement Memorandum (PPM) to investors for soliciting commitments.

Changes to Future PPM Amendments

For AI-only Funds, LVFs and Angel Funds:

• Merchant Banker involvement is no longer required when filing future changes to the PPM.

• Amendments can be filed directly with SEBI along with the CEO and Compliance Officer undertaking.

Impact on AIF Managers

The GARUDA mechanism is expected to:

• Reduce scheme launch timelines

• Improve certainty around fundraising schedules

• Shift accountability toward Managers and Merchant Bankers

• Lower procedural delays for sophisticated investor funds

• Improve ease of doing business for India’s AIF industry

The reforms also align with SEBI’s broader objective of enabling faster deployment of capital while retaining post-facto regulatory oversight.

If implemented, these changes will affect every Alternative Investment Fund manager, particularly fund operations, LP communications, PPM drafting, governance processes, and digital infrastructure.

Why is SEBI proposing these changes?

SEBI observed that AIFs currently follow different approaches for obtaining investor approvals. While the regulations prescribe approval thresholds, they do not specify how consent should be collected.

As a result:

• Different funds use different voting mechanisms.

• Non-responsive investors are treated differently across funds.

• Similar conflict-of-interest transactions are not always treated consistently.

• Existing definitions of “associate” are too narrow and may not capture all material conflicts.

The consultation paper aims to create a more transparent and predictable framework while preserving operational flexibility for AIFs.

1. Standardized Investor Consent Framework

SEBI proposes allowing every AIF to choose one of three voting methodologies.

Option 1 – Deemed Consent

Investors who do not respond within the specified timeline are treated as having approved the proposal.

Example

• 30% vote Yes

• 10% vote No

• 60% do not respond

Result:

• Approval = 90%

This model is already widely used across the AIF industry but has been criticized because important decisions could pass even without explicit investor participation.

Option 2 – Present and Voting

Only investors who actually participate in voting are counted.

Using the same example:

• 30 vote Yes

• 10 vote No

• 60 abstain

Approval:

30 / 40 = 75%

This aligns with voting approaches used in mutual funds, REITs and listed companies.

Option 3 – Express Voting

Only explicit “Yes” votes count against the total fund value.

Using the same example:

30 / 100 = 30%

This provides the highest investor protection but may make obtaining approvals significantly harder, especially for funds with large LP bases.

One Voting Method per Fund

SEBI proposes that every scheme should adopt only one methodology, which must be applied consistently to all investors.

Managers cannot use different voting methods for different LPs within the same scheme.

Mandatory Disclosure in PPM

Managers will also need to disclose:

• chosen voting methodology

• communication process

• voting timelines

• reminder process

• treatment of non-responses

• investor consent procedures

• associated risks

These disclosures would become part of the Private Placement Memorandum (PPM).

Uniform 75% Approval Threshold

Currently some provisions require:

• two-thirds approval

• 75% approval

SEBI proposes replacing the varying thresholds with a uniform approval requirement of 75% (by value) wherever applicable.

This simplifies interpretation and provides greater protection for minority investors.

Broader Conflict of Interest Rules

Perhaps the most important proposal is expanding the scope of transactions requiring investor approval.

Currently, many provisions refer to an “associate.”

SEBI believes this definition is too narrow and allows certain conflicted transactions to avoid investor approval.

Examples include:

• companies controlled by relatives

• common promoters

• indirect ownership structures

• entities connected through control rather than direct shareholding

These may not currently require LP approval.

Introducing “Related Party”

SEBI proposes replacing “associate” with a broader “related party” concept for conflict-related provisions.

The proposed definition is largely based on Section 2(76) of the Companies Act, 2013, covering:

• relatives

• directors

• partners

• key managerial personnel

• holding companies

• subsidiaries

• associate companies

• entities under common control

• other specified related persons

This would substantially increase the number of transactions requiring investor approval.

Existing Funds

SEBI has proposed that existing schemes may continue using their current investor consent methodology.

The new voting framework would apply prospectively, avoiding disruption for existing funds.

Operational Impact for AIF Managers

If these proposals are implemented, fund managers should prepare for:

• Updating Private Placement Memorandums

• Defining formal voting policies

• Standardizing LP communication workflows

• Maintaining complete audit trails

• Recording every investor communication

• Managing digital voting processes

• Monitoring related-party transactions before execution

• Updating compliance manuals and internal governance procedures

Funds relying on email-based approvals or manual spreadsheets may find compliance increasingly difficult.

What This Means for Fund Technology

These proposals reinforce the need for modern digital fund administration platforms capable of managing:

• Investor voting

• Digital consent collection

• Automated reminders

• Voting analytics

• Audit logs

• Related-party approval workflows

• Governance records

• Compliance reporting

As regulatory expectations continue to evolve, fund managers will increasingly benefit from systems that embed compliance directly into operational workflows rather than treating it as a manual process.

Public Consultation

SEBI has invited comments from stakeholders on these proposals.

Last date for submission: 21 July 2026.

Conclusion

This consultation paper represents one of the most significant proposed governance reforms for Indian AIFs in recent years. By standardizing investor consent mechanisms and broadening the scope of conflict-of-interest transactions, SEBI seeks to improve transparency, consistency, and investor protection while preserving flexibility for sophisticated investment funds.

AIF managers should evaluate the proposed changes carefully and begin assessing how their governance processes, PPMs, investor communication practices, and technology platforms may need to evolve if these amendments are adopted.