The Securities and Exchange Board of India (SEBI) has provided clarification regarding the applicability of the broad-based fund requirement to Alternative Investment Funds (AIFs) and their schemes under the Mutual Fund (MF) Regulations.
1. Applicability to Advisory/Management Services
SEBI clarified that:
- The broad-based fund requirement applies to entities providing management or advisory services to AIFs
- This ensures that such services are extended only to funds meeting prescribed diversification criteria
2. Assessment at Scheme Level
- Compliance with the broad-based requirement shall be evaluated at the scheme level, and not merely at the fund level
This ensures granular compliance across different investment strategies within a fund.
3. Independent Compliance by Each Fund
- Each fund, including feeder funds
- Must independently satisfy the broad-based criteria
This prevents reliance on compliance at a group or umbrella level.
4. No Exemption for Domestic Entities
- SEBI has clarified that domestic entities are not eligible for any exemption from this requirement
5. Conclusion
The clarification reinforces SEBI’s focus on investor diversification and regulatory consistency, ensuring that AIF structures and their schemes adhere to broad-based participation norms at an individual level.
