GARUDA Framework by SEBI for Faster AIF Launch

The Securities and Exchange Board of India (SEBI) has given its nod to the GARUDA framework, which is designed to expedite the launches of Alternative Investment Fund (AIF) schemes. This initiative also intends to minimise compliance requirements for specific funds. GARUDA, which stands for Green-Channel: AIF Rollout Upon Document Acknowledgement, has introduced a fresh classification system for AIF schemes. These have now been categorised into Large Value Funds (LVFs), Accredited Investor (AI)-only schemes, Angel Funds, and Regular Schemes.

Classification of AIF Schemes Under GARUDA

As part of this framework, Large Value Funds will remain accessible exclusively to accredited investors, each required to invest a minimum of Rs 25 crore. AI-only schemes and Angel Funds will also be confined to accredited investors, though a minimum investment limit has not been established for AI-only schemes.

Changes Introduced in Compliance Procedures

A significant alteration in the new framework is that AI-only schemes and Angel Funds will no longer be obligated to submit their Placement Memorandums (PPMs) through a SEBI-registered merchant banker. Fund managers and designated officers will have the capability to self-certify compliance with AIF regulations and all other relevant laws.

Efficient Launch Mechanism for AIF Schemes

With GARUDA, AI-only schemes and Angel Funds will gain eligibility for immediate launch upon SEBI’s acknowledgement of their documents, as opposed to the previous process that generally took about 30 days and necessitated merchant banker certification. For Regular Schemes, the timeline for launching has now been trimmed down to 10 working days, though the merchant banker requirement will still persist.

Responsibilities of Fund Managers and Disclosures

The onus for disclosures in these schemes will lie with the fund manager and designated officials. However, for Regular Schemes, merchant bankers and AIF managers will continue to share responsibility for ensuring that the disclosures submitted to SEBI are both accurate and complete.

Impact on Investment Landscape

The regulatory body anticipates that this new framework will lead to a reduction in paperwork, lower compliance costs, and significant shortening of the time frame required to launch investment schemes. This initiative is poised to particularly benefit venture capital, private equity, and angel investment funds that mainly attract investments from sophisticated investors.

By transitioning to a more rapid approval process and enhancing accountability for fund managers, SEBI seeks to bolster ease of doing business while safeguarding investor interests. The Gazette notification for the revised AIF Regulations is pending, and some provisions may come into effect only once the official notification is released.