SEBI’s AIF Certification Mandate


The Securities and Exchange Board of India (SEBI) has recently enacted regulatory changes regarding the composition and qualifications of key personnel within the management teams of alternative investment funds (AIFs).

This regulatory mandate, outlined in a Notification dated 10-5-20231, and a Circular dated 13-5-20242 (13 May Circular), signals a strategic shift towards elevating standards of expertise and professionalism within the investment management domain. This directive, outlined in Regulation 4 of the SEBI (Alternative Investment Funds) Regulations, 20123 (AIF Regulations), emphasises SEBI’s commitment to fortifying investor protection mechanisms and ensuring the integrity of the financial markets.

Previously, Regulation 4(g)(i) of the AIF Regulations stipulated that AIF managers must have at least one key personnel possessing specified levels of experience and professional qualifications. However, SEBI, vide its Notification dated 15-6-20234, amended the AIF Regulations, opting to replace the experiential prerequisites with certification mandates.

Now, under the revised Regulation 4(g)(i) of the AIF Regulations, AIF managers are now obligated to include at least one key personnel holding a relevant certification, subject to SEBI’s periodic specifications. Effective from 10-5-2024, this amendment designates certification from the National Institute of Securities Market (NISM), specifically the NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination, as the requisite qualification. This alteration is mirrored in the SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 20075.

The NISM certification boasts a validity period of three years, necessitating renewal to ensure continual compliance with certification requirements. The 13 May Circular emphasises on the immediate applicability of the new certification prerequisite to all applications for AIF registration and scheme launches submitted after 10-5-2024. For existing schemes or those awaiting launch approval, a grace period of one year has been allotted to facilitate compliance. Furthermore, SEBI mandates that adherence to these regulatory provisions must be explicitly addressed in the compliance test report (CTR) compiled by managers at the conclusion of each financial year.

As per SEBI’s Master Circular for AIFs dated 7-5-20246, trustees or sponsors of AIFs bear the responsibility for ensuring compliance with the newly mandated certification requirements for key investment personnel.


SEBI’s new certification requirement for key investment personnel in AIFs marks a substantial enhancement in regulatory oversight and market integrity.

First, by mandating certification from the NISM, SEBI ensures that fund managers possess specialised and up-to-date knowledge, thereby elevating the professional standards across the industry. This requirement fosters a culture of continuous professional development, as certifications need to be renewed every three years, ensuring that key personnel stay abreast of the latest industry practices and regulatory changes.

Second, this move significantly bolsters investor confidence. By guaranteeing that individuals managing their investments are adequately qualified and knowledgeable, SEBI addresses potential concerns about mismanagement and incompetence. This assurance of competence and professionalism helps to attract and retain investors, which is crucial for the growth and stability of the AIF sector.

Third, the introduction of a standardised certification benchmark promotes consistency and uniformity in the qualification of key personnel across the industry. This uniformity helps in creating a level playing field where all fund managers meet the same stringent standards, thereby enhancing the overall credibility and reliability of the AIF market.

Fourth, by shifting the compliance responsibility to trustees and sponsors, SEBI ensures that accountability is clearly defined and that there is a robust framework for adherence to certification standards. This approach not only enhances transparency but also mitigates risks associated with mismanagement and inadequate expertise within the industry.

Moreover, this regulatory change mitigates risks associated with inexperienced or unqualified personnel handling complex investment strategies. By requiring certification, SEBI aims to reduce instances of mismanagement, thus protecting investors and ensuring that their funds are managed with a high degree of competence and integrity.

Aligning with global best practices, SEBI’s initiative positions India as a more attractive destination for both domestic and international investors. By adhering to internationally recognised standards of professionalism and regulatory compliance, the Indian AIF market can draw in more investments, contributing to the overall growth and development of the financial sector.

It is pertinent to note that the benefits extend beyond risk mitigation. This move also promotes best practices within the industry. With certified professionals at the helm, AIFs are more likely to adopt sophisticated and effective investment strategies, further enhancing their performance and competitiveness.

However, while these regulatory measures represent a proactive stance towards enhancing industry standards, they are not without potential drawbacks.

Concerns may arise about the feasibility and accessibility of obtaining certifications, especially for smaller AIF managers or those operating in specialised market segments. These firms might struggle with the financial and logistical aspects of meeting the certification requirements, potentially putting them at a competitive disadvantage compared to larger, better-resourced firms.

Additionally, there is a risk of unintended consequences, such as a shortage of certified professionals. This scarcity could increase hiring costs and create delays in staffing key positions. Moreover, stringent certification processes might inadvertently erect barriers to entry for individuals from diverse backgrounds, reducing the industry’s diversity and innovation potential.

Recommendations and conclusion

To address these challenges, SEBI could implement support mechanisms, such as subsidising certification costs for smaller firms or providing alternative pathways for demonstrating competence and expertise. This might include recognising equivalent qualifications or relevant professional experience as a part of the certification criteria. Furthermore, ongoing monitoring and evaluation of the certification framework’s efficacy are crucial. By establishing a feedback loop with industry stakeholders, SEBI can identify and address emerging issues promptly, adapting the requirements in line with evolving market dynamics.

In the end, a balanced approach that prioritises both regulatory rigour and industry inclusivity will be essential. SEBI must ensure that the certification process maintains high standards while also being accessible and equitable. Collaboration with industry bodies to develop a comprehensive yet manageable certification programs will be key to fostering a resilient and sustainable alternative investment ecosystem in India. By fostering a culture of continuous learning and accountability, SEBI lays the foundation for a resilient and sustainable alternative investment ecosystem that can attract both domestic and international investors, contributing to the long-term growth and development of India’s financial sector.

*5th year student, BA LLB (Business Law Hons.) at National Law University, Jodhpur. Author can be reached at:

1. Securities and Exchange Board of India, Certification for Alternative Investment Fund Manager’s Key Personnel, Notification No. SEBI/LAD-NRO/GN/2024/176 dated 10-5-2024.

2. Securities and Exchange Board of India, Certification Requirement for Key Investment Team of Manager of AIF, Circular No. SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/42 (Issued on 13-5-2024). ()

3. Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.

4. Securities and Exchange Board of India (Alternative Investment Funds) (Second Amendment) Regulations, 2023, Notification No. SEBI/LAD-NRO/GN/2023/132 dated 15-6-2023.

5. Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007.

6. Securities and Exchange Board of India, Master Circular for Alternative Investment Funds (AIFs), SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/39 (Issued on 7-5-2024).

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