New Delhi, June 22 -- The Securities and Exchange Board of India (SEBI) has further reduced the timeline for alternative investment funds (AIFs) to launch new schemes to 10 days, which is one-third of the shortened timeline introduced just two months ago in April.

Following its board meeting on June 19, the market regulator also said that funds can launch their accredited investor (AI)-only schemes, including angel fund schemes, even sooner. Such schemes can now be launched immediately after the fund receives its registration.

This mechanism has been named GARUDA, short for Green Channel: AIF Rollout Upon Document Acknowledgement.

To launch new schemes, funds must first obtain their AIF registration and then secure approval for their schemes' private placement memorandum (PPM).

The shortened timelines apply only to the second leg of the process, that is, after an entity has been granted AIF registration.

Background

Until April this year, a registered AIF had to file its scheme's PPM with SEBI through a merchant banker.

The regulator would review the disclosures made in the PPM, the due diligence certificate issued by the merchant banker, and provide comments where needed. The fund or the merchant banker would then incorporate these comments into the PPM and submit a revised version to the regulator before launching the scheme or circulating the PPM among investors.

As this was time-consuming, the regulator in April allowed funds to circulate their PPMs among investors 30 days after filing them with SEBI. Essentially, they no longer had to wait for months for the regulator's comments before introducing every new scheme.

If SEBI provided comments within these 30 days, the fund had to ensure compliance before circulating the PPM.

This timeline has now been reduced further to 10 days. For AI-only schemes, the waiting period has been eliminated altogether.

This fast-track mechanism follows the principle of the lodge-and-launch framework introduced by Malaysia's securities market regulator more than a decade ago. SEBI chairman Tuhin Kanta Pandey had spoken about the regulator's intent to introduce such a mechanism at a public event in March.

Published by HT Digital Content Services with permission from VC Circle.