Sebi mulls AI-only AIF regulatory regime with significantly less compliance requirements

Mumbai, Aug 21 (PTI) Markets regulator Sebi has proposed a new accredited investors-only alternative investment fund (AIF) regime with lesser compliance rules, a move aimed at enabling sophisticated investors to back higher-risk ventures more efficiently, its senior official said on Thursday.

Separately, Sebi is also working on an FPI (Foreign Portfolio Investors) portal, a one-stop shop that will provide clear information for existing and new foreign investors on ways to access Indian markets, its Whole Time Member Ananth Narayan G said at FICCI CAPAM 2025 event here.

On Accredited Investors (AIs), he said that globally, such investors are identified as experienced and capable of handling risk, so they are given fewer regulatory protections. To qualify, investors must show they can manage risk and are willing to accept fewer safeguards.

India introduced an AI framework in 2021, but it hardly gained traction because the process was cumbersome and expensive, and offered few benefits.

However, this is now changing, as Sebi has already simplified the process of obtaining AI status, making it largely paper-free, and is working to make it even easier, Narayan said.

He said that Sebi is looking to allow AIF (Alternative Investment Fund) managers to do the initial checks for AI status.

Also, Narayan said that Sebi has now " proposed an AI-only AIF regulatory regime that has significantly less compliance requirements around investor protection--our pathway to optimum regulations around AIFs. We want to enable sophisticated investors to back higher-risk ventures in an efficient manner".

On FPI front, he said, "Sebi is also developing an FPI Portal, providing clarity and transparency to existing and prospective foreign investors around our regulatory regime".

This will also be a one-stop shop for global investors to understand the "how" of accessing India markets, he added.

In August 2023, Sebi came out with norms requiring foreign funds with more than 50 per cent of their holdings in a single corporate group to give detailed information about all their owners and beneficiaries. However, some funds such Sovereign Wealth Funds and regulated mutual funds with strict rules on diversification and transparency were exempt, based on a trust-but-verify approach.

Now, the regulator wants to turn these exemptions into a positive qualification. The idea is to create a framework called SWAGAT-FI or a Single Window Automatic & Generalized Access for Trusted Foreign Investors. This could cover up to 70 per cent of foreign portfolio investor (FPI) assets, Narayan said.

Trusted FPIs would benefit from easier registration, simpler compliance requirements, and broader market access, similar to large domestic investors.

On the Futures& Options market, Narayan said that Sebi is considering ways to improve the tenor and maturity profile of derivative products, so that they better support sustained capital formation.

"This may also need to be achieved in a calibrated manner, giving the system adequate time to adjust," he added.

He said that the regulator is open to objective and simple mechanisms to ensure that derivative participation is informed, suitable, and appropriate.

Sebi's approach to arriving at the optimum regulatory regime around derivatives has been, and will continue to be, analytical and consultative.

Average daily traded volumes in equity cash markets have grown rapidly by over 25 per cent Compounded Annual Growth Rate over the past 5 years, to well over Rs 1 lakh crore now.

Earlier in the day, Sebi Chairman Tuhin Kanta Pandey also stressed on improving the tenor and maturity profile of derivative products. PTI IAS SP MR