SEBI Extends Broad-Based Norms to AIFs Managed by AMCs

Market regulator Securities and Exchange Board of India has clarified that asset management companies (AMCs) and their subsidiaries offering management or advisory services to alternative investment funds (AIFs) must adhere to the “broad-based fund” requirement. This effectively extends mutual fund-style investor norms to such pooled investment vehicles.

Guidance Issued Following Industry Query

In an informal guidance dated April 9, issued in response to a query from UTI Alternatives Pvt Ltd, SEBI stated that AIFs qualify as pooled assets under existing regulations. As a result, they must meet the condition of having at least 20 investors, with no single investor holding more than 25% of the total corpus, when managed or advised by AMCs or their subsidiaries.

Compliance to Be Assessed at Scheme Level

The regulator further clarified that compliance with the broad-based requirement must be evaluated at the individual scheme level rather than at the overall fund level. Under AIF regulations, each scheme is treated as a separate investment vehicle with its own investor limits, corpus requirements, and compliance obligations. SEBI noted that assessing norms at the scheme level more accurately reflects the actual investor composition of the pooled vehicle receiving AMC or advisory services.

No Relaxation for Master-Feeder Structures

Addressing master-feeder fund structures, SEBI stated that both master and feeder funds must independently comply with the broad-based criteria. This applies regardless of where investment decisions are made, indicating that feeder structures will not receive any blanket exemptions.

Limited Scope for Exemptions

On exemptions, SEBI clarified that certain relaxations available to specific categories of foreign portfolio investors (FPIs) under mutual fund rules do not extend to domestic regulated entities. Institutions such as banks, insurance companies, and provident fund trusts, being governed by separate domestic regulations, are not eligible for such exemptions.

Also Read: SEBI Reaffirms Commitment to Global Capital at India–US Investment Dialogue

The regulator emphasised that the clarification is based on the specific facts presented in the query and represents an interpretative view of the department. It does not constitute a binding decision of the SEBI Board and may differ depending on the circumstances of individual cases.

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