The Securities and Exchange Board of India (SEBI) has released its updated Master Circular for Alternative Investment Funds (AIFs) on June 3, 2026, consolidating all regulatory directives issued up to May 31, 2026.

This comprehensive framework supersedes the previous Master Circular dated May 7, 2024, aiming to ensure effective regulation and provide stakeholders with a unified access point for all compliance requirements.

The 2026 Master Circular introduces stringent operational and governance norms. A major highlight is the mandatory NISM certification for key investment personnel and AIF compliance officers, with the latter requirement taking effect from January 1, 2027.

Furthermore, SEBI has formalized the dematerialisation of AIF units, requiring schemes to issue units in demat form and credit them to investors' accounts or temporarily to an "Aggregate Escrow Demat Account".

To enhance transparency, AIFs must also participate in mandatory performance benchmarking and upload their Net Asset Value (NAV) to depositories.

To bolster market integrity, SEBI has mandated specific due diligence by AIF managers to prevent the circumvention of regulatory frameworks, including RBI's stressed asset norms and FEMA regulations regarding investments from countries sharing a land border with India.

Additionally, the circular details critical flexibility for dealing with unliquidated investments. AIFs can now enter a designated "dissolution period" or arrange for in-specie distribution upon tenure expiry, provided they secure approval from 75% of their investors by value.

This updated circular underscores SEBI's continued commitment to enhancing transparency, protecting investor rights, and standardizing the operations of India's fast-growing AIF industry.

Source: SEBI circular