Regular scheme

The AIF rules do not treat every scheme alike. How much process a scheme carries depends on who its investors are.

A regular scheme is the ordinary case, and the workbook defines it by subtraction. It is a scheme other than a Large Value Fund for Accredited Investors, an Accredited Investor Only Fund, or an Angel Fund.

So a regular scheme is any scheme that has not been built exclusively for investors the regulator treats as able to look after themselves.

Because of that, it gets the full process. An independent merchant banker checks the private placement memorandum. SEBI may send comments that must go in. The scheme waits 10 working days. And the PPM is audited every year.

The term matters because almost every filing rule in Chapter 9 begins by asking whether the scheme is regular or not.

The definition (Chapter 9, section 9.5.1). SEBI prescribes the process separately for Regular Schemes, i.e. schemes other than Large Value Fund for Accredited Investors (LVF), Accredited Investor Only Fund (AI-only Fund) and Angel Funds. The workbook's footnote puts it the other way round: non-LVF schemes include Angel Funds and AIF schemes other than LVFs.

What a regular scheme must do that an LVF need not:

The disclaimer. Every regular scheme's PPM carries SEBI's prescribed four-paragraph disclaimer, in which the merchant banker certifies the disclosures are true, fair and adequate, the Manager and merchant banker confirm the PPM does not conflict with regulatory requirements, and both accept responsibility for accuracy. The disclaimer for LVFs and AI-only Funds is the same text with the Manager in the merchant banker's place.

The annual PPM audit (section 9.5.2). Compliance with the terms of the PPM must be audited at the end of each financial year, by an internal or external auditor or legal professional. Audit of the sections on Risk Factors, Legal Regulatory and Tax Considerations, Track Record of First Time Managers, Illustration of Fees and Expenses and Glossary and Terms is optional. Findings and corrective steps go to the Trustee or Board or Designated Partners of the AIF, the Board of the Manager and SEBI within 6 months of the financial year end. The contribution or subscription agreement must be aligned with the PPM and shall not go beyond it.

Who escapes the PPM disclosure and audit requirements. The workbook lists three cases:

1. Angel Funds as defined in the AIF Regulations — except that an Angel Fund with total investments at cost exceeding INR 100 crore must carry out the annual PPM compliance audit from FY 2025-26 onwards.
2. AIFs or schemes in which each investor commits a minimum capital contribution of INR 70 crore (USD 10 million or equivalent in a non-INR currency) and furnishes SEBI's prescribed waiver from the PPM template and the annual audit.
3. Large Value Funds as defined in the AIF Regulations, without the requirement of obtaining a specific waiver from investors.

There is also relief for an AIF that has not raised any money from investors — it files a Chartered Accountant's certificate within 6 months of the financial year end instead.

Where the thresholds differ between papers. Chapter 15 of this workbook defines an LVF as a scheme in which each investor invests not less than INR 25 crore, while Chapter 9's waiver category above turns on INR 70 crore (USD 10 million). Those are two different tests in the same paper, not a contradiction. Note, though, that the published Large Value Fund for Accredited Investors page — written from the Series XIX-B workbook — puts the PPM-audit waiver at Rs 25 crore (USD 3 million). Series XIX-E's Chapter 9 gives INR 70 crore (USD 10 million) for that waiver. Answer from the paper you are sitting.

The fund and amounts are illustrative; the classification tests, the deadlines and the thresholds are the workbook's.

Meridian India Opportunities Fund — Scheme II is a Category III AIF with a corpus of Rs 400 crore across 42 investors. The largest single commitment is Rs 30 crore; 9 investors are accredited and 33 are not.

Step 1 — classify it. Not every investor is accredited, so it is neither an AI-only Fund nor an LVF. It is not an Angel Fund. It is therefore a Regular scheme.

Step 2 — the filing. The PPM goes through a SEBI-registered merchant banker with the due diligence certificate, and the scheme may launch only 10 working days after filing. Filed 1 September, with one SEBI-office holiday in the window, the earliest launch is 17 September.

Step 3 — the audit. The largest commitment is Rs 30 crore, so no investor reaches the INR 70 crore waiver threshold and no waiver is available. The annual PPM compliance audit is mandatory. For the year ended 31 March, findings and corrective steps must reach the Trustee, the Board of the Manager and SEBI by 30 September.

Step 4 — change one fact. Suppose the same Rs 400 crore had come from 5 accredited investors committing Rs 80 crore each. Now every investor is accredited and above INR 25 crore, so the scheme is an LVF: it files directly under the intimation to SEBI model, launches on the day of filing, and — as an LVF — is outside the PPM audit without needing any investor waiver. The same Rs 400 crore, 16 calendar days and one annual audit apart, purely because of who the investors are.

Step 5 — an Angel Fund. An Angel Fund is outside the Regular scheme track for filing. But if its total investments at cost cross INR 100 crore, it must still carry out the annual PPM compliance audit from FY 2025-26.

Chapter 9, sections 9.5.1 (Filing of PPM and Launch of AIF Schemes) and 9.5.2 (PPM Audit). The whole of section 9.5 is organised around the Regular scheme / LVF split, which makes it one of the most reliably examined structures in the paper.

Expect: the definition by exclusion (which of a list is a Regular scheme), the 10 working days, whichever is later for a first scheme, the 1 month consolidated intimation of PPM changes, the 6 months for audit findings, the optional audit sections, and the three exemptions with their INR 100 crore and INR 70 crore figures.

• Regular is the residual class. It is defined as everything that is not an LVF, an AI-only Fund or an Angel Fund. A question naming a scheme with one non-accredited investor is testing this.
• Angel Funds are not Regular schemes for filing, but they can still be audited. The audit obligation returns once total investments at cost exceed INR 100 crore, from FY 2025-26.
• Two different rupee thresholds do two different jobs. INR 25 crore per investor defines an LVF in Chapter 15; INR 70 crore per investor plus a waiver buys the PPM and audit exemption in Chapter 9.
• An LVF gets the exemption without a waiver; the INR 70 crore class must furnish one. That is the whole difference between exemptions 2 and 3.
• 10 working days is not 10 calendar days, and whichever is later governs a first scheme.
• SEBI gives comments, not approval. Incorporating comments is mandatory; treating the filing as an approval is not.
• This is nothing to do with a mutual fund's regular plan. Direct and regular plans is a mutual fund distribution concept from another paper. Confusingly, Chapter 9 of this workbook does use Direct Plan for AIF investors who arrive through a fee-charging intermediary — but that is about commission, not about scheme classification.