SEBI Mutual Funds
& AIF Regulations
Twenty-two chapter notes covering SEBI’s regulatory framework for mutual funds (MF Regulations 1996) and alternative investment funds (AIF Regulations 2012) — the constitution of a mutual fund (sponsor, trustee, AMC, custodian), the scheme categories (equity, debt, hybrid), the NAV calculation, the distributor and advisor framework, the three-category AIF structure (Category I, II, III), and the investor eligibility thresholds. Fund structure first, scheme category second, NAV mechanism third.
Mutual funds and AIFs — two distinct pools of investment capital.
The SEBI (Mutual Funds) Regulations 1996 govern the establishment, operation, and regulation of mutual funds in India. A mutual fund is a trust that pools the savings of investors and invests those savings in a diversified portfolio of securities. The structure is a four-tier principal model — sponsor (promoter), trustee (overseer), asset management company (AMC, fund manager), and custodian (safekeeping). The SEBI (Alternative Investment Funds) Regulations 2012 govern privately pooled investment funds that are not regulated by other SEBI regulations — private equity funds, venture capital funds, hedge funds.
These notes anchor every chapter to its Regulation. The most-tested areas for MF are Regulation 2(m) (definition of mutual fund), the four-tier structure, the scheme categorisation circular, NAV calculation and declaration, the Total Expense Ratio, the distributor-commission framework, and the SEBI Investor Charter. For AIF: the Category I/II/III distinction, the minimum corpus, the minimum commitment, and the accredited investor concept.
Each chapter is designed to be read in twelve to fifteen minutes and to leave the reader with the Regulation number, the fund structure, the scheme or category, the NAV or pricing mechanism, and the leading authority.
How to read these notes
Start with the fund type.
Every chapter begins with the fund type. Mutual fund (regulated by SEBI MF Regulations 1996) or AIF (regulated by SEBI AIF Regulations 2012)? For MF: what is the scheme category (equity, debt, hybrid, solution-oriented, other)? For AIF: what category (I — infrastructure/SME/social, II — PE/debt, III — hedge/complex trading strategies)? The type and category determine the applicable rules.
Test the structural obligation.
Every MF/AIF question identifies the structural obligation. For MF: Is it a trustee obligation (fiduciary duty to unit holders), an AMC obligation (investment management, NAV declaration), or a distributor obligation (suitability, disclosure of commission)? For AIF: Is it the minimum corpus requirement (20 crore for Category I/II, 20 crore for Category III), the lock-in, or the accredited investor threshold?
Test on the leading case.
If you can restate the holding of SEBI v. Shriram Mutual Fund, Franklin Templeton Trustee Services v. Amruta Garg, or SEBI v. Sahara India Real Estate Corporation in two sentences, you understand the chapter. If not, return to the statutory section and rebuild from there.
All 22 chapters, in 3 groups
Sequenced through the natural structure of the subject — every chapter sits in a doctrinal cluster.Mutual Fund Structure & Registration
MF Regulations 1996 — Regulations 1–16
Regulation 2(m) definition of mutual fund. The four-tier structure — sponsor (Regulation 7 eligibility including five-year track record and net worth requirements), trustee (Regulation 16 obligations as the watchdog of the fund), AMC (Regulation 21 obligations including investment management and NAV calculation), custodian (Regulation 28 custodial obligations). Regulation 9 requirements for registration as a mutual fund. The SEBI registration process.
Scheme Categories, NAV & Distributor Framework
MF Regulations + SEBI Circulars on scheme categorisation
SEBI’s scheme categorisation circular (October 2017) — thirty-six mandated categories for open-ended schemes across five groups (equity, debt, hybrid, solution-oriented, other). NAV calculation — Net Asset Value per unit = (value of securities + accrued income - liabilities) / number of units outstanding. NAV declaration frequency (daily for open-ended schemes). Total Expense Ratio (TER) limits. The distributor-commission framework and the direct-plan versus regular-plan concept.
AIF Regulations 2012 — Three Categories
AIF Regulations + investor eligibility
SEBI AIF Regulations 2012 — the three categories. Category I AIF: angel funds, SME funds, social venture funds, infrastructure funds — concessions in terms of investment conditions. Category II AIF: PE funds, debt funds, real estate funds — no specific investment conditions or concessions. Category III AIF: hedge funds, complex trading strategies — can use leverage. The minimum corpus (20 crore rupees), the minimum commitment per investor (1 crore rupees), and the accredited investor concept under the Accredited Investors Regulations 2021. The interface with FEMA for foreign investor participation.