SEBI Rolls Out ‘GARUDA’ Framework To Expedite Fund Launches

The Securities and Exchange Board of India (SEBI) has released a new framework to simplify and expedite the launch of new schemes by alternative investment funds (AIFs).

Under the new green channel framework, AIFs can launch regular schemes within ten working days of filing their private placement memorandum (PPM) with the SEBI via a registered merchant banker, unless the regulator says otherwise. 

However, newly-registered AIFs can launch their first scheme after SEBI registration or ten days after filing their PPM, whichever is later. 

Prior to this, AIFs were required to file a PPM, a mandatory disclosure document detailing a scheme’s investment strategy, fee structure, risks, governance framework and investor rights, before launching a scheme. This often involved regulatory review and led to delays, but the new framework aims to solve these issues and speed up the process.

Called Green-channel: AIF Rollout Upon Document Acknowledgement (GARUDA), the new mechanism also delineates between regular schemes and specialised funds. A regular scheme encompasses any fund that does not fall under the categories of large value funds (LVFs) for accredited investors, accredited investor-only funds (AIoFs), or angel funds. 

The new circular also paves the way for lighter treatment to accredited investor-only funds, LVFs and angel funds. Under the new rules, LVFs and accredited investor-only funds are exempt from additionally filing their PPM via their merchant bankers, and can launch a scheme immediately after filing the document with SEBI themselves. 

For first-time LVFs and AIoFs, launch can begin from the date SEBI registration is granted. Angel funds also get the same relaxation and can circulate their PPM for soliciting funds from the date of SEBI registration itself.

In the circular, the markets regulator also clarified that filing the PPM does not mean the regulator has approved it, adding that merchant bankers will remain responsible if there are omissions or misleading statements. A formal due diligence certificate, alongside “fit and proper” declarations and PAN details of key leadership and entities, must be submitted on the SEBI intermediary portal.

To maintain clarity, SEBI has also mandated strict naming conventions for these specialised funds. Any new AIoF scheme must append the words “AI only fund” or “AIOF” at the end of its official name. Similarly, large value funds must append “LVF” to the end of their scheme title.

The regulatory relief for AIoFs, LVFs and angel funds also extends to ongoing operational updates. These vehicles are exempt from using a merchant banker when notifying SEBI of changes to their private placement memorandums. Instead, the AIF CEO or compliance officer can directly file these updates via a formalised undertaking.

These updated provisions come into effect immediately, noted SEBI.

This comes a couple of months after the markets regulator proposed a new green-channel mechanism to enable AIFs to launch schemes within ten working days of filing their PPMs instead of 30 days.

With the new framework, the regulator is looking to accelerate fund launches by reducing approval timelines and placing greater reliance on disclosures, certifications and the accountability of fund managers. 

This marks a broader shift in the regulator’s approach from pre-launch scrutiny to post-facto supervision and enforcement.

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