SEBI Relaxes AIF Norms, Approves AI-Only Schemes and Wider Exemptions for Large Value Funds

SEBI has set out how current Alternative Investment Fund (AIF) schemes can shift to accredited investor-only (AI-only) schemes or Large Value Funds (LVFs). This can take place only after all investors give written consent.  

Fund managers must also check that the scheme meets the eligibility conditions attached to the new category before the transition is approved. 

How the Framework came about 

The circular follows rule changes introduced in November, when SEBI created AI-only schemes as a separate category within AIFs.  

These schemes are meant for investors who meet accredited criteria, which allows the regulator to place lighter compliance requirements on them. LVFs, which already involve higher minimum investment amounts, were also given more room on operational processes. 

Naming Updates and Reporting Timelines 

Any scheme launched as an AI-only or LVF must include “AI only fund” or “LVF” at the end of its name. If an existing scheme converts to either category, the updated name must be reported to SEBI within 15 days.  

Depositories also need to be informed within the same period so their records match the scheme’s new status. These steps apply to both new launches and conversions. 

Treatment of Accredited Investor Status 

SEBI has clarified that once an investor enters a scheme as an accredited investor, the status will hold for the entire life of the scheme, even if the investor no longer meets the criteria later.  

For AI-only schemes, the regulator has capped the possible extension of the scheme’s tenure at five years, which includes any extension granted before conversion. 

Procedural Relief for LVFs 

LVFs have been exempted from using the standard placement memorandum template. They are also no longer required to undergo an annual audit of the placement memorandum terms.  

These exemptions apply automatically and do not need separate waivers from investors. 

Read More: SEBI to Take Decision on 11 Key Proposals: Broker Regulation, Revamp of Mutual Fund Expense and More! 

Conclusion 

The updated rules mainly focus on documentation, naming norms and investor status, giving AIFs a clearer path if they choose to operate as AI-only schemes or LVFs. The circular sets out a uniform process without altering core obligations for fund managers. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.