In short: SEBI has notified the Alternative Investment Funds (Third Amendment) Regulations, 2026. They add a new way to qualify as an "accredited investor" and bring in net worth and securities market exposure tests for LLPs and companies. They also replace Regulation 25 with a rule sending investor disputes to a dispute-resolution mechanism, and bar the manager's losses and costs from being paid out of the fund's property.

What has happened?

SEBI notified the amendment on 9 October 2026 under the Securities and Exchange Board of India Act, 1992. It appeared in the Gazette of India (Extraordinary) dated 14 October 2026. The regulations are in force from the date of their publication in the Official Gazette. They amend the SEBI (Alternative Investment Funds) Regulations, 2012, which had last been amended by the Second Amendment Regulations, 2026.

This article covers the AIF amendment. The sources we used do not cover any SEBI amendments for REITs or InvITs, so we say nothing about them here.

Who counts as an accredited investor now?

Earlier, the definition in regulation 2(1)(ab) relied on a certificate of accreditation from an accreditation agency. The amendment adds a second route. An investor can now also be accredited by a specified SEBI-registered or SEBI-regulated entity. This must follow the eligibility conditions and the manner that SEBI specifies from time to time.

  • New securities market exposure test: one of the existing categories gets a new item. It requires securities market exposure of at least ₹5 crore, as specified by SEBI.

The amendment also edits the proviso to the definition. It removes the reference to Category-I foreign portfolio investors and sovereign wealth funds. It adds persons resident outside India, as defined in the Foreign Exchange Management Act, 1999, alongside multilateral agencies. It also deletes a closing phrase about those who need not obtain an accreditation certificate. Anyone relying on the proviso should read the Gazette text itself.

New dispute-resolution rule for AIF investors

SEBI has replaced Regulation 25 with a two-part provision.

  1. Disputes go to a formal mechanism. Suppose investors and an AIF or its manager have a dispute, difference or claim arising from the securities market activities of the AIF or manager. The matter must go to the dispute-resolution mechanism, which includes conciliation and/or arbitration. The procedure is the one SEBI specifies.
  2. The fund does not pay for the manager's losses. Losses or expenses incurred by the manager or its officers cannot be met from the AIF's property. This includes the costs of settling investors' claims or disputes.

A related change: debt listing

Separately, SCC Online reports that SEBI notified the Listing Obligations and Disclosure Requirements (Third Amendment) Regulations, 2026 on 12 October 2026. Regulation 62-A now requires an entity whose non-convertible debt securities are listed on or after the amendment's publication date to list all such securities it issues after that initial listing. Sub-regulations (2) and (3) are omitted.

Who is affected, and what should you do?

  • AIF managers and sponsors: check how your investor onboarding treats accreditation. Also check whether your fund documents handle disputes and expense allocation consistently with the new Regulation 25.
  • LLPs and companies that invest: you may now qualify through a securities market exposure test instead of net worth alone. The exact way to measure exposure is for SEBI to specify.
  • Individual investors: the new ₹5 crore exposure item adds a route to accredited status. SEBI will specify the detailed conditions separately.

This article is general information, not legal advice.

Frequently asked questions

When did the AIF amendment take effect?

It takes effect on the date of its publication in the Official Gazette. The notification is dated 9 October 2026 and the Gazette issue is dated 14 October 2026.

Can an AIF pay a manager's costs of settling investor claims out of the fund?

No. The new Regulation 25 says that the manager's or its officers' losses and expenses, including costs of settling investor claims or disputes, are not to be met from the AIF's property.

Sources

Not legal advice. This page explains the law in general terms. Rules, fees and limits change, and your facts matter. Check the official source or consult a qualified advocate before acting. Disclaimer