Sebi Regulator Releases Operational Framework to Expedite Launch of Alternative Investment Fund Schemes

The market regulator Sebi unveiled the operational framework for the green channel mechanism named GARUDA on Thursday. This mechanism is designed to simplify and accelerate the process of launching alternative investment fund schemes (AIFs).

GARUDA Mechanism and New Rules

The operational framework for the 'Green Channel: AIF Launch After Documentation Confirmation' mechanism (GARUDA) was developed based on amendments to the Sebi Regulations on Alternative Investment Funds 2012, which were officially published at the beginning of this month.

Under the revised system, AIFs launching standard schemes can commence operations within 10 working days after submitting a Private Placement Memorandum (PPM) to Sebi through a registered merchant broker, unless Sebi provides otherwise, as stated in the Sebi circular.

Procedure for Launching Different Types of Funds

For schemes being launched for the first time, the start date can be either the date of registration with Sebi or after 10 working days from the application submission, whichever is later.

The regulator also established a simplified process for funds exclusively for accredited investors (AI-only), large volume funds (LVFs), and angel funds. These types of funds are exempt from the requirement of submitting their PPM through a merchant broker and can launch their schemes immediately after filing the PPM with Sebi.

The first AI-only and LVF schemes can start from the date of issuance of the Sebi registration approval, while angel funds can distribute their PPMs among investors from the date of registration.

Disclosure Requirements

Sebi has mandated that merchant brokers conduct an independent due diligence check of all data presented in the PPMs of standard schemes and certify that this information is true, fair, and adequate.

Merchant brokers appointed to file PPMs must not have any affiliation with the AIF, its sponsor, manager, or trustee.

Furthermore, the regulator introduced mandatory disclaimers in the PPMs, clarifying that the submission of the document to Sebi should not be construed as regulatory approval, and the responsibility for the accuracy and completeness of the disclosure lies with the manager and the merchant broker.

Responsibility and Naming Conventions

For AI-only funds, LVFs, and angel funds, the responsibility for disclosure will be borne by the AIF manager, supported by a commitment from the Chief Executive Officer and Compliance Officer instead of the merchant broker.

Additionally, Sebi stipulated that new AI-only schemes must include the words 'AI only fund' or 'AIOF' in their name, and large volume funds must have the suffix 'LVF'. The regulator also exempts AI-only funds, LVFs, and angel funds from the requirement to route changes in their PPMs through merchant brokers; such changes can now be submitted directly to Sebi along with the prescribed undertaking.

This circular came into immediate effect and applies to all AIF scheme PPMs submitted to the regulator from the date of notification of the Sebi Regulations on Alternative Investment Funds (Second Amendment) 2026.

business-standard.comJuly 23, 16:48

Sebi proposes reforms to the online dispute resolution system in securities markets

The Securities and Exchange Board of India (Sebi) has presented a series of proposals to change the structure of Online Dispute Resolution (ODR) in the securities market. The goal of these changes is to increase process efficiency, reduce case review times, and improve the enforceability of decisions.

Change in responsibility for dispute resolution

One of the central proposals is the transfer of dispute resolution functions from ODR institutions to Market Infrastructure Institutions (MIIs), which include custodians and stock exchanges. The process will remain entirely technology-based, but MIIs will manage the entire workflow, utilizing their closer regulatory oversight over intermediaries and listed companies.

Revision of the arbitrator appointment process

The regulator also proposed adjustments to the procedure for appointing arbitrators and mediators. Parties to the dispute must provide their preferences from a list of arbitrators, after which MIIs will select a suitable candidate. As for mediators, they will be appointed directly by MIIs from their approved pool.

Acceleration of complaint review

To speed up the claims settlement process, it was proposed that unresolved complaints on the SCORES platform would be directed straight to the mediation stage within ODR after verification by designated authorities. This will reduce the process timeframe by 21 days.

Protection of investor interests

To address investor concerns, Sebi proposed allowing investors in Alternative Investment Funds (AIFs) to resolve disputes through mechanisms agreed upon in previously concluded contracts, instead of mandatorily using the ODR platform. Furthermore, Sebi proposed expanding legal protection, currently available to AIF investors structured as trusts, to investors operating through companies or limited liability partnerships, thereby ensuring uniform guarantees regardless of the fund's structure.