‘Green-Channel: AIF Rollout Upon Document Acknowledgement’ (GARUDA) Mechanism for Processing of Placement Memorandum of Alternative Investment Funds (AIFs) filed with SEBI

Securities and Exchange Board of India (SEBI), vide Circular No. HO/19/19/11(2)2026-AFD-RAC2/I/17617/2026 dated July 30, 2026, has announced an important update regarding the ‘Green-Channel: AIF Rollout Upon Document Acknowledgement’ (GARUDA) mechanism for processing Placement Memorandum (PPM) of Alternative Investment Funds (AIFs).

Key Details of the Update –
• Objective: Introduces the GARUDA mechanism to simplify and expedite the launch of AIF schemes by streamlining the processing of Placement Memoranda (PPMs).

• Applicability: Applies to Alternative Investment Funds (AIFs), Merchant Bankers, AI-only Funds, Large Value Funds for Accredited Investors (LVFs), and Angel Funds.

• Regular Schemes: Regular AIF schemes may be launched after 10 working days from filing the PPM with SEBI unless otherwise advised. The first scheme may be launched from the date of SEBI registration or after 10 working days from filing, whichever is later.

• PPM Filing Requirements for Regular Schemes: PPM must be filed through a SEBI-registered Merchant Banker along with:
• Merchant Banker Due Diligence Certificate.
• Fit and Proper declarations.
• Sponsor/Manager declarations on minimum continuing interest.
• PAN details of specified entities and key personnel.

• Merchant Banker Responsibilities: Merchant Banker must independently verify the accuracy and adequacy of disclosures, issue a due diligence certificate, and must not be an associate of the AIF, Sponsor, Manager, or Trustee.

• Mandatory Disclosures: PPMs of Regular Schemes must include prescribed disclaimer clauses regarding due diligence, regulatory compliance, SEBI's non-approval of the PPM, and responsibility for disclosures.

• AI-only Funds and LVFs: These funds are exempt from Merchant Banker filing requirements and may launch schemes immediately upon filing the PPM with SEBI. First schemes may be launched only after SEBI registration.

• Angel Funds: Angel Funds are exempt from Merchant Banker filing and may circulate their PPM from the date of SEBI registration.

• PPM Filing for AI-only Funds, LVFs and Angel Funds: Filing must be accompanied by a signed undertaking from the CEO (or equivalent) and Compliance Officer of the AIF Manager in the prescribed format.

• Scheme Naming Requirements: New AI-only schemes must end with "AI only fund" or "AIOF", while LVF schemes must end with "LVF".

• Key Changes: AI-only Funds, LVFs and Angel Funds are exempt from routing changes in PPM through a Merchant Banker. Such changes can be filed directly with SEBI along with the prescribed undertaking.

• Effective Date: The circular comes into force with immediate effect and applies to PPMs filed with SEBI from the date of notification of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026.

• Penalty/Consequence: The Manager and Merchant Banker (where applicable) remain responsible for the accuracy and completeness of disclosures. Any irregularity or lapse in the PPM may attract regulatory action against the concerned entities.

Actions if Any –
• Regular AIF schemes must file the PPM through an independent SEBI-registered Merchant Banker along with all prescribed documents before launch.

• AI-only Funds, LVFs and Angel Funds must submit the prescribed undertaking signed by the CEO (or equivalent) and Compliance Officer while filing the PPM.

• Ensure all PPMs include the mandatory disclaimer clauses and comply with revised naming conventions for AI-only Funds and LVFs.

Compliance Deadline –
• Effective immediately. The revised framework applies to all PPMs filed with SEBI from the date of notification of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026.