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EXAM IMPACT: - This SEBI circular directly impacts three major XIX series certification exams such as NISM Series XIX-A, NISM XIX-B, & NISM XIX-C
May indirectly influence other NISM exams beyond the XIX series such as NISM-Series-XII: Securities Markets Foundation (General awareness questions on SEBI regulatory updates), NISM-Series-XVII: SORM (Compliance processes and fund-structure changes), or NISM-Series-XV: Research Analyst Exam (Understanding investor classes, AIF categories, risk disclosures). These exams may introduce awareness-level questions but will not test technical details like XIX-Series exams.
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How does this SEBI circular allow AIFs to migrate to AI-only schemes and what new flexibilities are granted to Large Value Funds (LVFs) for Accredited Investors? & What NISM Exams May Be Influenced by This SEBI Circular in the Future?
SEBI now permits existing AIF schemes to migrate to AI-only or LVF structures provided they obtain 100 percent investor consent, update the scheme name, and report the change to SEBI and the depositories within 15 days. AI-only schemes gain a clearer investor class and up to 5 years of additional tenure flexibility, while LVFs receive major regulatory relaxations, including exemption from the standard PPM template and annual PPM audit, without needing investor waivers.
HINDI: SEBI ने मौजूदा AIF योजनाओं को AI-ओनली या LVF संरचनाओं में परिवर्तित होने की अनुमति दे दी है, बशर्ते उन्हें सभी निवेशकों की सहमति प्राप्त हो, योजना का नाम अपडेट किया जाए और 15 दिनों के भीतर SEBI और डिपॉजिटरी को इस परिवर्तन की सूचना दी जाए। AI-ओनली योजनाओं में निवेशकों का वर्ग अधिक स्पष्ट हो जाता है और उन्हें 5 वर्ष तक की अतिरिक्त अवधि का लचीलापन मिलता है, जबकि LVF को कई महत्वपूर्ण नियामकीय छूटें प्राप्त होती हैं, जिनमें मानक PPM टेम्पलेट और वार्षिक PPM ऑडिट से छूट शामिल है, और इसके लिए निवेशकों से किसी प्रकार की छूट की आवश्यकता नहीं होती है।
What conditions must existing AIF schemes meet to convert into AI-only or LVF schemes?
Existing AIF schemes can convert to AI-only or LVF structures only if they obtain 100 percent investor consent, update the scheme name to include “AI only fund” or “LVF,” and report the conversion to both SEBI and the depositories within 15 days.
HINDI: मौजूदा एआईएफ योजनाएं केवल एआई-ओनली या एलवीएफ संरचनाओं में तभी परिवर्तित हो सकती हैं जब उन्हें 100 प्रतिशत निवेशकों की सहमति प्राप्त हो, योजना के नाम में "एआई ओनली फंड" या "एलवीएफ" शामिल करके उसे अपडेट करें और 15 दिनों के भीतर एसईबीआई और डिपॉजिटरी दोनों को रूपांतरण की सूचना दें।
How will investor accreditation status be treated post-conversion?
An investor who qualified as an Accredited Investor at the time of onboarding will continue to be treated as an AI for the entire life of the scheme, even if they lose their accreditation status later.
HINDI:जो निवेशक ऑनबोर्डिंग के समय एक मान्यता प्राप्त निवेशक के रूप में अर्हता प्राप्त कर लेता है, उसे योजना की पूरी अवधि के दौरान एक एआई के रूप में ही माना जाता रहेगा, भले ही वह बाद में अपनी मान्यता स्थिति खो दे।
What operational and compliance relaxations have been introduced?
SEBI has allowed AI-only schemes a tenure extension of up to five years and granted LVFs major relaxations, including exemption from the standard PPM template, exemption from the annual PPM audit, and removal of the need for investor waiver letters. Managers must still record these changes in the Compliance Test Report (CTR).
HINDI: SEBI ने AI-ओनली स्कीमों को पांच साल तक का कार्यकाल विस्तार दिया है और LVF को कई महत्वपूर्ण छूटें प्रदान की हैं, जिनमें मानक PPM टेम्पलेट से छूट, वार्षिक PPM ऑडिट से छूट और निवेशक छूट पत्रों की आवश्यकता को समाप्त करना शामिल है। प्रबंधकों को इन परिवर्तनों को कंप्लायंस टेस्ट रिपोर्ट (CTR) में दर्ज करना अनिवार्य है।
What NISM Exams May Be Influenced by This SEBI Circular in the Future?
This circular is most likely to influence the NISM XIX Series exams, especially XIX-A (AIF Operations), XIX-B (AIF Category III Distributors), and XIX-C (AIF Managers), because it introduces new concepts such as AI-only schemes, LVF exemptions, investor consent requirements, reporting timelines, and AI status continuity. These changes affect the regulatory framework sections of all three exams and may shape future MCQs and scenario-based questions.
HINDI: इस परिपत्र का NISM XIX सीरीज की परीक्षाओं, विशेष रूप से XIX-A (AIF संचालन), XIX-B (AIF श्रेणी III वितरक) और XIX-C (AIF प्रबंधक) पर प्रभाव पड़ने की सबसे अधिक संभावना है, क्योंकि इसमें AI-आधारित योजनाएं, LVF छूट, निवेशक सहमति आवश्यकताएं, रिपोर्टिंग समयसीमा और AI स्थिति की निरंतरता जैसी नई अवधारणाएं शामिल हैं। ये परिवर्तन तीनों परीक्षाओं के नियामक ढांचा अनुभागों को प्रभावित करते हैं और भविष्य के बहुविकल्पीय प्रश्नों और परिदृश्य-आधारित प्रश्नों को आकार दे सकते हैं।
HINGLISH SUMMARY: SEBI ke iss circular ke baad AIF schemes ko AI-only ya LVF structure mein migrate karne ke liye kaun-kaun si exact conditions fulfill karni padti hain, aur yeh update future NISM XIX exams ko kaise impact karega?
Yeh SEBI circular AIF industry ke liye kaafi important hai, kyunki ab existing AIF schemes 100% investor consent ke saath AI-only ya LVF structure mein migrate kar sakti hain. Name update karna aur 15 din ke andar SEBI aur depositories ko report karna mandatory hai. AI-only schemes ko 5 saal tak extra tenure flexibility milti hai, aur LVFs ko major compliance relief milta hai, jaise standard PPM format aur annual PPM audit ki requirement se छूट. Jo investor onboarding ke time Accredited Investor qualify kar leta hai, uski AI status scheme ki poori life ke liye valid rehti hai. Exam point of view se, yeh circular directly NISM XIX-A, XIX-B, XIX-C ko impact karega, kyunki isme investor eligibility, migration rules, LVF exemptions aur reporting timelines jaise naye topics add ho gaye hain. Future exams mein MCQs aur scenario-based questions inhi points par aa sakte hain.
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RegDEEP™ - Regulatory Decoding & Explanation for Exam Purpose™ of Circular: HO/19/34/11(5)2025-AFD-POD1/I/188/2025
1. Snapshot Summary (Plain-Language Digest)
- SEBI has introduced AI-only schemes, funds exclusively for Accredited Investors.
- Existing eligible AIF schemes may convert into AI-only or LVF schemes, with 100 percent investor consent.
- Scheme names must add "AI only fund" or "LVF" post-conversion.
- Conversion must be reported to SEBI and Depositories within 15 days.
- Once onboarded as an Accredited Investor, the investor retains AI status for the entire scheme tenure, even if status lapses later.
- AI-only schemes may now extend tenure by up to 5 years, including past extensions.
- LVFs are exempted from standard PPM template and annual PPM audit, without requiring investor waivers.
- Compliance Test Report (CTR) must include adherence to this circular.
- Regulations are amended to ease operations for AIF Managers.
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2. Background & Context
SEBI amended the AIF Regulations on Nov 19, 2025 to:
- Create a separate category of AI-only schemes meant for sophisticated investors.
- Reduce investor-protection-oriented compliance for schemes where investors are assumed knowledgeable.
- Grant flexibility to LVFs, funds with minimum INR 70 crore commitment per investor, catering to UHNI and institutional segments.
- Improve ease of doing business for AIF managers by simplifying reporting and documentation norms.
This aligns with SEBI’s broader goals of:
- Enhancing the AIF ecosystem efficiency,
- Reducing paperwork for experienced investors,
- Supporting capital formation through regulated alternative investments.
3. Clause-by-Clause Breakdown
(Plain-language translation plus exam relevance)
Clause 1 - Purpose of Amendment
SEBI amended AIF Regulations to:
- Introduce AI-only schemes,
- Provide regulatory flexibilities, and
- Extend relaxations to LVFs.
Meaning: SEBI is segmenting sophisticated investors and giving them lighter compliance.
Exam angle: Why were AI-only schemes introduced?
Clause 2 - Naming Requirement
New schemes must add "AI only fund" or "LVF" at the end of the scheme name.
Example: "XYZ AI only fund" or "ABC LVF".
Meaning: Immediately identifies the nature of the fund.
Exam angle: MCQ on scheme-name suffix requirement.
Clause 3 - Eligibility for Conversion
AIFs or AIF schemes launched before the amendment (Nov 19, 2025) may convert to AI-only or LVF subject to SEBI conditions.
Meaning: Old schemes are not left out; they can migrate voluntarily.
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Clause 4 - Conditions for Conversion
Conversion requires:
- 4.1 Positive consent of all investors
- 4.2 Scheme name updated to include "AI only fund" or "LVF"
- 4.3 Reporting to SEBI within 15 days
- 4.4 Reporting to Depositories within 15 days to update systems
Meaning: Conversion equals unanimous investor approval plus mandatory reporting.
Exam angle: Timeline-based questions (15 days).
Clause 5 - Accredited Investor (AI) Status Continuity
Once an investor qualifies as AI at onboarding, they continue to be treated as AI throughout the scheme, even if their net worth later drops.
Meaning: No need to re-evaluate AI status yearly.
Exam angle: Does AI status lapse if the investor loses financial eligibility later? Answer: No.
Clause 6 - Extension of Scheme Tenure
AI-only schemes can extend tenure by up to 5 years, including extensions already granted before conversion.
Meaning: More flexibility for long-horizon strategies.
Exam angle: Tenure extension limits after conversion.
Clause 7 - Exemption for LVFs
LVFs are exempt from:
- Standard PPM template
- Annual audit of PPM
- No investor waivers required
Meaning: Significant compliance burden reduction.
Exam angle: Differences between normal AIFs and LVFs.
Clause 8 - Compliance Test Report (CTR)
Trustee or sponsor must ensure the CTR includes compliance with this circular.
Meaning: SEBI wants documentation of adherence.
Exam angle: What additional reporting requirement applies?
Clause 9 - Immediate Effect
The circular is effective immediately.
Clause 10 to 12 - Regulatory Authority
Circular issued under SEBI powers and available on SEBI website.
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4. Exam Relevance Mapping
This circular directly impacts three key NISM exams:
NISM-Series-XIX-A: AIF (General)
Relevant Units:
- Unit 4: Regulatory Framework
- Understanding AIF categories, AI concept, LVF criteria
- Conversion rules, investor consent, reporting timelines
Expected exam questions:
- Definition and conditions of AI-only schemes
- Tenure extension for AI-only schemes
- AI status continuity
NISM-Series-XIX-B: Category III AIF Distributors
Relevant Unit:
- Unit 5: SEBI AIF Regulations
Focus:
- Distributor suitability and disclosure norms
- When to recommend AI-only and LVF products
- Investor eligibility and consent process
NISM-Series-XIX-C: AIF Managers
Relevant Chapter:
- Chapter 17: Regulatory Framework
- 17.4.1 Accredited Investors
- 17.4.3 Large Value Funds
Manager-level emphasis:
- Reporting to SEBI and Depositories
- Incorporating changes in CTR
- Operational impact of exemption from PPM audits
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5. Industry Impact & Real-World Application
This circular brings major industry-level changes for AIF managers, distributors, trustees, and investors.
A. Simplifies fundraising from sophisticated investors
AI-only schemes allow:
- Higher flexibility,
- Faster structuring,
- Reduced compliance cycles.
This boosts UHNI and Family Office participation.
B. LVFs become significantly easier to operate
LVFs no longer require:
- Standard PPM format
- Annual PPM audit
- Investor waivers
This cuts costs by an estimated 20 to 40 percent for some managers.
C. Managers can repurpose old schemes
Existing schemes may migrate to AI-only or LVF with 100 percent investor consent.
This enables:
- Strategy alignment with current market opportunities
- Shift toward sophisticated asset classes
- Better risk-return matching
D. Operational flexibility improves portfolio management
Five year tenure extension is highly beneficial for strategies involving:
- Private credit
- Complex derivatives
- Venture investments
- Distressed assets
E. Investor-relations workload reduces
AI status is effectively locked once onboarding is complete.
No more:
- Yearly net worth revalidation
- KYC for AI eligibility status
- Delays due to AI certificate renewal
F. Technology and reporting adjustments required
Managers must:
- Update scheme names
- Reconfigure reporting systems
- Coordinate with Depositories
All within 15 days of conversion.
G. PPM drafting and audit industry impact
Law firms, auditors, and compliance teams see reduced workloads for LVFs.
6. Why This Matters for Learners
- Simplifies core understanding of AIF regulatory structure.
- High chance of exam questions in upcoming 2026 cycles.
- Helps distributors explain suitability of AI-only versus LVF schemes.
- Supports managers preparing for operational, compliance, and reporting responsibilities.
- Prepares candidates for scenario-based questions, especially around investor eligibility.
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7. Key Takeaways (Quick Revision Sheet)
- AI-only schemes are exclusive to Accredited Investors.
- Existing AIF schemes may migrate with 100 percent investor consent.
- Scheme names must include "AI only fund" or "LVF".
- Report conversion to SEBI and Depositories within 15 days.
- AI status remains valid even if financial thresholds fall.
- AI-only schemes get 5 year maximum extension.
- LVFs are exempt from PPM templates and annual PPM audits.
- CTR must include compliance with this circular.
- Effective immediately.
8. Updates, Amendments & Implementation Timeline
- AIF Regulations amended on Nov 19, 2025.
- This circular is effective Dec 8, 2025 (immediately).
- Conversion flow:
- Consent
- Rename
- Report to SEBI (15 days)
- Report to depositories (15 days)
No transition grace period specified.
9. Sample Questions (Exam Prediction Set)
MCQ 1
Once onboarded as an Accredited Investor, AI status:
Correct Answer: Continues for scheme life
MCQ 2
What is the maximum extension possible for an AI-only scheme?
Correct Answer: 5 years
MCQ 3
For an existing AIF scheme to convert into an AI-only scheme:
Correct Answer: Positive consent from all investors is required
Scenario Question
A Category II AIF onboarded an investor as AI in 2024. In 2026, the investor’s income drops below the AI threshold. If the scheme migrates to AI-only in 2026, is the investor still eligible?
Answer: Yes - AI status continues for the entire lifecycle of the scheme.
Concept-Testing Question
Explain why LVFs no longer need to obtain investor waivers for PPM audit exemptions.
Answer: SEBI has provided a direct regulatory exemption, eliminating the need for investor-level waivers.
10. FAQ (Learner Clarification Layer)
Q1. Can existing AIF schemes migrate to AI-only or LVF structures?
Yes, but only with 100 percent investor consent.
Q2. What happens if a converted scheme misses the 15-day reporting deadline?
This would be considered non-compliance, impacting CTR and regulatory risk.
Q3. Can an investor who was never an AI at onboarding continue after conversion?
No, only those who were AI at onboarding can continue.
Q4. Are distributors involved in the consent collection process?
Yes, where distributors manage investor relationships.
Q5. Are AI-only schemes allowed to invest in all AIF asset classes?
Yes, the circular does not restrict investment strategy.
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11. Glossary (Defined Terms Micro-Set)
Accredited Investor (AI) / मान्यता प्राप्त निवेशक
English: An investor who meets SEBI’s prescribed income or net-worth criteria and is treated as a sophisticated investor eligible for lighter regulatory protections.
Hindi: वह निवेशक जो SEBI द्वारा तय की गई आय या नेट-वर्थ की शर्तों को पूरा करता है और जिसे अधिक जानकार व सक्षम निवेशक माना जाता है, इसलिए इसे कम नियामकीय सुरक्षा दी जाती है।
Accredited Investor (AI) / मान्यता प्राप्त निवेशक: AI ko aise investor ki tarah samajhiye jo already financially strong hota hai, isliye SEBI usko “expert” मानकर kuch compliance rules हल्के कर deta hai.
AI-only Scheme / केवल AI निवेशकों वाली स्कीम
English: An AIF scheme that allows participation only from Accredited Investors and receives additional regulatory flexibilities due to higher investor sophistication.
Hindi: वह AIF स्कीम जिसमें केवल मान्यता प्राप्त निवेशक ही निवेश कर सकते हैं और जिसे कम अनुपालन बोझ व कुछ अतिरिक्त छूट दी जाती है।
AI-only Scheme / केवल AI निवेशकों वाली स्कीम: AI-only scheme ko ek “exclusive club fund” की तरह समझें jahan sirf AI investors को entry मिलती है, इसलिए paperwork aur compliance कम होता है.
Large Value Fund (LVF) / बड़े मूल्य वाला फंड
English: An AIF where each investor commits at least INR 70 crore, and which receives major relaxations like exemption from the standard PPM template and annual PPM audit.
Hindi: वह AIF फंड जिसमें हर निवेशक कम से कम 70 करोड़ रुपये निवेश करता है और जिसे कई नियामकीय छूटें मिलती हैं, जैसे मानक PPM टेम्पलेट व वार्षिक ऑडिट से छूट।
Large Value Fund (LVF) / बड़े मूल्य वाला फंड: LVF ko ultra-high-ticket fund samajhiye jahan bade investors hote hain, isliye SEBI paperwork aur audit jaisi requirements को काफी कम कर देता है.
PPM (Placement Memorandum) / प्लेसमेंट मेमोरेंडम
English: A document that details the investment strategy, risks, governance, and terms under which an AIF scheme is offered to investors.
Hindi: वह दस्तावेज़ जिसमें फंड की निवेश रणनीति, जोखिम, शर्तें और संचालन से जुड़ी जानकारी दी जाती है।
PPM (Placement Memorandum) / प्लेसमेंट मेमोरेंडम: PPM को fund ka “rulebook + risk booklet” समझें jo investor ko batata hai fund kya karega aur kis risk ke saath.
Compliance Test Report (CTR) / अनुपालन परीक्षण रिपोर्ट
English: A periodic report prepared by the AIF manager documenting whether the scheme has complied with SEBI regulations and circulars, including new AI-only and LVF rules.
Hindi: यह एक रिपोर्ट है जिसे AIF मैनेजर तैयार करता है और जिसमें बताया जाता है कि फंड ने SEBI नियमों व परिपत्रों का पालन किया या नहीं।
PPM (Placement Memorandum) / प्लेसमेंट मेमोरेंडम: CTR ko fund ka “compliance health check-up” मान लीजिए, jahan manager लिखित तौर पर बताता है ki sab rules follow hue ya nahi.
12. Official Resources & Downloads
- SEBI Circular PDF (Dec 8, 2025): Modalities for migration to AI only schemes and relaxations to Large Value Funds for Accredited Investors under SEBI (Alternative Investment Funds) Regulations, 2012
- SEBI website: Legal → Circulars → Alternative Investment Funds.
- SEBI (Alternative Investment Funds) Regulations, 2012.
- NISM-Series-XIX-C: Alternative Investment Fund Managers Exam Preparation Online Mock Test & Practice Test with 1500+ Question
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This circular has been decoded using the RegDEEP™ (Regulatory Decoding & Explanation for Exam Purpose™) framework.
The hierarchy of headings, clause-by-clause interpretations, exam-mapping sections, glossary terms, FAQs, and industry-impact notes is deliberately organized to help both:
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