Alternative investment funds tell Sebi: One exam doesn't fit all

Push for a category split in certification as clock ticks down

With the May 9 deadline approaching, alternative investment funds (AIFs) are requesting relaxations to the Securities and Exchange Board of India (Sebi)-mandated certification for fund managers.

 

Industry sources reveal that while an extension on the compliance deadline is being sought, there are also discussions about potentially separating the certification examinations based on various AIF categories.

 

According to regulations introduced last May, at least one key member of an AIF’s investment team must pass the NISM (National Institute of Securities Markets) Series-XIX-C: Alternative Investment Fund Managers Certification Examination. The compliance deadline for existing AIF schemes is May 9, and the exam is now a prerequisite for all AIF registration applications.

 

The certification is proving challenging, as many fund managers struggle to pass the combined exam, which covers all AIF categories and compliance-related questions not relevant to investment management teams. Industry representatives argue that the exam places heavy emphasis on regulations and operations across all AIF categories, while most managers specialise in only one or two.

 

Sources suggest that while a decision on extending the deadline has not been finalised, Sebi and its education arm, NISM, are considering adjustments following productive discussions.

 

A source said, “The exam currently includes all Categories — I, II, and III schemes — in a single syllabus, but fund managers generally specialise in specific categories. Sebi has recognised this and instructed NISM to develop separate tests.”

 

NISM is reportedly consulting with fund managers to revise the syllabus, with hopes that segregated exams will be introduced before the May 9 deadline.

 

Pearl Agarwal, founder and managing partner of Eximius Ventures, said, “Most investment teams rarely handle Category III funds, making parts of the exam theoretical rather than practical. Preparing for it also takes valuable time away from managing funds.”

 

While the exact number of non-compliant fund managers remains unclear, concerns have been raised at the industry association level. Sebi has not responded to queries at the time of reporting.

 

The AIF sector has seen rapid growth, driven by interest from high-net-worth individuals, family offices, and institutional investors.

 

As of December 2024, total commitments had reached ₹13.05 trillion, with investments adding up to ₹5.06 trillion.