SEBI notification dated 10 July 2026, titled SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026.
1. Executive Summary
The amendment represents a procedural and regulatory rationalisation of the framework governing the launch of schemes by Alternative Investment Funds (AIFs). The principal thrust appears to be to:
- Revise the scheme filing and fee framework under Regulation 12.
- Extend the prescribed period for filing scheme-related documents from thirty days to ten working days, as reflected in the amendment.
- Remove the scheme fee requirement for the first scheme launched by an AIF.
- Replace the earlier reference to fees under the Second Schedule with documents specified by SEBI, indicating a shift towards a more flexible, document-based filing framework.
- Provide a formal mechanism for SEBI to communicate comments on documents filed with it.
- Place an explicit responsibility on the merchant banker or Manager to ensure compliance with SEBI's comments.
- Make specific modifications for Large Value Funds for Accredited Investors (LVF) and Accredited Investor-only Funds.
- Remove certain requirements relating to merchant banker involvement under Regulation 19D and omit Regulation 19D(5).
Overall, the amendment appears intended to streamline AIF scheme launches, reduce procedural friction and costs, and create a more differentiated regulatory framework for sophisticated investor structures, particularly Accredited Investor-focused funds.
2. Key Amendments at a Glance
| Area | Position after amendment | Likely significance |
|---|---|---|
| Scheme filing requirement | Regulation 12(1) wording revised to refer to filing along with applicable fees as specified in the Second Schedule | Clarifies the filing/fee framework |
| First scheme of an AIF | Scheme fee not payable | Reduces initial launch cost |
| Filing timeline | "Thirty days" replaced with "ten working days" | Potentially accelerates scheme launch process |
| Filing documents | Reference to Second Schedule fees replaced with documents specified by SEBI | Greater flexibility for SEBI-prescribed documentation |
| SEBI comments | Board may communicate comments to merchant banker or Manager | Formalises regulatory feedback mechanism |
| Compliance with comments | Merchant banker/Manager must ensure comments are complied with | Creates explicit accountability |
| LVF | Certain provisions modified/replaced by reference to Accredited Investor-only Fund | Tailors framework to sophisticated-investor structures |
| Merchant banker requirement | Certain references removed from Regulation 19D | Reduces merchant banker-related procedural requirements |
3. Detailed Analysis
A. Exemption from Scheme Fee for the First Scheme
One of the most significant amendments is the insertion of a proviso after Regulation 12(1), providing that payment of scheme fees will not apply in the case of the launch of the first scheme by an Alternative Investment Fund.
Regulatory significance
This is a meaningful cost-relief measure for a newly registered or newly operational AIF launching its first scheme. The first scheme is often the stage at which an AIF Manager incurs substantial establishment and fundraising expenses. Exemption from the scheme fee may therefore:
- Reduce the initial cost of commencing operations;
- Facilitate quicker operationalisation of newly registered AIFs;
- Encourage new fund managers to enter the AIF ecosystem;
- Reduce the regulatory cost associated with the initial scheme launch.
Practical implication
AIF Managers should distinguish between:
- The first scheme launched by the AIF, for which the fee exemption applies; and
- Subsequent schemes, where the applicable scheme fee requirements would continue to apply, subject to the prevailing regulatory framework.
The amendment therefore appears to provide a one-time benefit rather than a blanket exemption from scheme fees.
B. Change in the Timeline from "Thirty Days" to "Ten Working Days"
The amendment substitutes the words "thirty" with "ten working" in Regulation 12(2).
This is potentially one of the most consequential operational changes.
Impact
The change indicates a move towards a shorter, business-day-based regulatory process. For AIF Managers, this may have the effect of:
- Accelerating scheme launch timelines;
- Reducing uncertainty around regulatory processing;
- Improving fundraising and deployment planning;
- Enabling fund managers to respond more rapidly to market opportunities.
However, the practical effect will depend on the precise point from which the ten-working-day period is calculated and whether the documents submitted are complete and compliant.
Important compliance consideration
The reduction in the prescribed period should not be interpreted as an automatic approval mechanism. AIF Managers should continue to ensure that all prescribed documents are complete and accurate before filing.
In practice, the compliance team should maintain:
- A scheme launch checklist;
- A document submission tracker;
- Evidence of the date of filing;
- Confirmation of completeness of documents;
- A mechanism for tracking SEBI comments and their resolution.
C. Introduction of a Formal SEBI Comment Mechanism
The substituted Regulation 12(3) provides that:
After the specified documents are filed with the Board, the Board may communicate its comments, if any, to the merchant banker or the Manager.
This creates a clearer regulatory interface between SEBI and the AIF ecosystem.
Significance
The amendment recognises that SEBI's review may result in comments requiring clarification, modification or rectification.
The key change is that the communication of regulatory comments is now expressly contemplated within the regulatory framework.
This should help establish a more structured process for:
Filing → SEBI review → Comments → Compliance → Scheme launch
4. Increased Accountability of Merchant Banker / Manager
A new Regulation 12(3A) provides that:
"The merchant banker or the Manager shall ensure that the comments provided under sub-regulation (3) are complied with."
This is an important governance enhancement.
Earlier position
The regulatory framework appears to have contemplated SEBI review and comments but did not expressly place the same degree of responsibility on the merchant banker or Manager to ensure compliance.
Position after amendment
The responsibility is now expressly imposed on:
- The merchant banker, where applicable; or
- The Manager.
This creates a clear accountability framework.
Practical implications for AIF Managers
The Manager should establish a formal process for:
- Receiving SEBI comments;
- Reviewing each comment;
- Assigning responsibility for action;
- Making necessary changes;
- Obtaining internal approval;
- Confirming compliance;
- Maintaining documentary evidence of compliance.
The Manager should also ensure that fund marketing documents, placement memoranda and other scheme documents are consistent with the changes made in response to SEBI comments.
5. Special Treatment for Accredited Investor-Only Funds
The amendment makes a specific modification in the proviso after Regulation 12(3), replacing references to "Large Value Fund for Accredited Investors" with "Accredited Investors only fund" in the relevant provision.
This appears to reflect a broader regulatory movement towards differentiating the compliance framework based on the sophistication and financial capacity of investors.
Regulatory rationale
Accredited Investors are generally regarded as investors capable of understanding and assuming higher levels of investment risk.
A framework specifically designed for Accredited Investor-only funds can therefore permit:
- Greater flexibility;
- Reduced procedural requirements;
- Faster fund establishment;
- Lower regulatory friction.
The amendment should therefore be viewed as part of the continuing trend towards risk-based and investor-segmented regulation.
6. Removal of Certain Merchant Banker Requirements under Regulation 19D
The amendment provides that in Regulation 19D(4), the words "through a merchant banker" shall be omitted.
Further, Regulation 19D(5) is omitted.
Significance
This appears to reduce the mandatory role of merchant bankers in the relevant process under Regulation 19D.
The broader implication may be a move towards simplification of compliance requirements for certain AIF structures, particularly those involving sophisticated investors.
However, the precise impact should be assessed by reference to the underlying provisions of Regulation 19D and the specific category of AIF to which the provision applies.
For AIF Managers, the key point is that the amendment may reduce dependence on merchant bankers for certain regulatory processes, potentially resulting in:
- Lower transaction costs;
- Faster execution;
- Simplification of procedural requirements;
- Greater direct responsibility on the AIF Manager.
7. Governance and Compliance Implications
The amendment appears to shift the regulatory framework towards greater Manager accountability.
While merchant bankers continue to have a role where specifically prescribed, the Manager is increasingly becoming the central point of responsibility for ensuring that:
- Scheme documentation is complete;
- Regulatory comments are addressed;
- Necessary amendments are incorporated;
- Scheme documents remain compliant;
- The fund launch process is properly documented.
This makes it advisable for AIF Managers to strengthen their internal regulatory governance framework.
8. Recommended Action Points for AIF Managers
In view of the amendment, AIF Managers should consider the following actions:
Immediate Actions
1. Review existing scheme launch SOPs
The internal scheme launch process should be updated to reflect the revised Regulation 12 framework.
2. Update regulatory filing checklists
The compliance checklist should specifically capture:
- Applicable scheme fees;
- Whether the scheme is the first scheme of the AIF;
- Documents prescribed by SEBI;
- Filing date;
- Ten-working-day timeline;
- SEBI comments;
- Date of receipt of comments;
- Date of compliance.
3. Review first-scheme fee exemption
New AIFs preparing to launch their first scheme should assess whether they qualify for the fee exemption.
4. Establish a SEBI comment tracker
Every SEBI comment should be recorded, assigned, resolved and formally closed.
5. Review agreements with merchant bankers
Existing arrangements should be examined to determine whether any merchant banker functions have become unnecessary following the amendment.
6. Review Accredited Investor fund structures
Managers operating or proposing to operate funds exclusively for Accredited Investors should examine whether the amended provisions provide additional regulatory flexibility.
9. Overall Assessment
The SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026 can broadly be viewed as a facilitative and process-oriented amendment aimed at making the AIF regulatory framework more efficient.
The most notable features are:
- Fee exemption for the first scheme of an AIF;
- Reduction of the prescribed period from thirty days to ten working days;
- Formalisation of SEBI's comment process;
- Express responsibility of the merchant banker/Manager to ensure compliance with SEBI comments;
- Regulatory differentiation for Accredited Investor-only funds; and
- Reduction of certain merchant banker-related requirements.
From a compliance perspective, the amendment is likely to be positive for AIF Managers, particularly new fund managers and managers catering to sophisticated investors. At the same time, the increased emphasis on the Manager's responsibility for responding to SEBI comments means that internal compliance controls and documentation will become even more important.
Key takeaway
The amendment appears to pursue a dual objective: facilitating faster and more cost-efficient AIF scheme launches while simultaneously making the AIF Manager more directly accountable for regulatory compliance and the resolution of SEBI's comments.
For professional advisory purposes, I would recommend treating this notification as a regulatory update requiring an impact assessment rather than merely a procedural amendment, particularly for new AIFs, first-time scheme launches, Accredited Investor-only funds, and existing AIFs that use merchant bankers in processes covered by Regulation 19D.
