The Securities and Exchange Board of India (SEBI) has approved the GARUDA framework, which aims at speeding up the launch of Alternative Investment Fund (AIF) schemes and reducing compliance requirements for certain funds.
GARUDA, short for Green-Channel: AIF Rollout Upon Document Acknowledgement, introduces a new classification system for AIF schemes. These have been divided into Large Value Funds (LVFs), Accredited Investor (AI)-only schemes, Angel Funds, and Regular Schemes.
Under the framework, Large Value Funds will continue to be available only to accredited investors, with each investor required to commit at least Rs 25 crore. AI-only schemes and Angel Funds will also be restricted to accredited investors, although no minimum investment threshold has been prescribed for AI-only schemes.
A major change under the new system is that AI-only schemes and Angel Funds will no longer need to file their Placement Memorandums (PPMs) through a SEBI-registered merchant banker. Instead, fund managers and designated officers will be allowed to self-certify compliance with AIF regulations and other applicable laws.
Under GARUDA, AI-only schemes and Angel Funds will be eligible for immediate launch upon acknowledgement of their documents by SEBI, compared to the earlier process that typically took around 30 days and required merchant banker certification. For Regular Schemes, the launch timeline has been reduced to 10 working days, although the merchant banker requirement will continue.
The responsibility for disclosures in these schemes will rest with the fund manager and designated officials. For Regular Schemes, however, merchant bankers and AIF managers will continue to be jointly responsible for ensuring the accuracy and completeness of disclosures submitted to SEBI.
The regulator expects that the new framework will reduce paperwork, lower compliance costs, and shorten the time required to launch investment schemes. The move is likely to benefit venture capital, private equity, and angel investment funds that primarily raise money from sophisticated investors.
By shifting towards a faster approval process and greater accountability for fund managers, SEBI aims to improve ease of doing business while maintaining investor protection.
The Gazette notification for the amended AIF Regulations is still awaited, and some provisions may come into effect only after the formal notification is issued.
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