In a significant move aimed at bolstering regulatory compliance and investor discipline, the Securities and Exchange Board of India (SEBI) has issued a fresh circular on July 29, 2025, focused on enforcing the Minimum Investment Threshold in Specialized Investment Funds (SIFs). This latest directive is in continuation of earlier circulars dated February 27, April 9, and April 11, 2025, which together establish the broader framework governing SIFs.
What Are Specialized Investment Funds (SIFs)?
SIFs are tailored investment vehicles designed to cater to specific strategies or asset classes, and are often aimed at high-net-worth or institutional investors. These funds have minimum investment requirements to ensure that only suitable investors—capable of bearing associated risks—participate.
Core Update: Daily Monitoring & Compliance
SEBI has now mandated daily monitoring of compliance with the Minimum Investment Threshold by Asset Management Companies (AMCs). As per the revised guidelines under Para 4.1.4.1 of Annexure A of the SIF circular, AMCs must ensure that:
Investors’ total investment in a SIF does not fall below the minimum threshold of ₹10 lakh.
Redemptions or transfers initiated by the investor do not result in an active breach of this threshold.
Mechanism to Address Breaches
To strengthen compliance, SEBI has outlined a clear mechanism for dealing with breaches of the minimum investment amount:
Active Breach Definition:
Any drop in the investor’s total investment below ₹10 lakh across all SIF strategies, due to redemptions, off-market transfers, or stock exchange transactions initiated by the investor, will be termed as an active breach.
Immediate Actions Upon Breach:
Freezing of Units: All units held by the investor across all SIF strategies will be frozen for debit (i.e., the investor cannot redeem or transfer them).
Notice Period: A 30-day notice will be issued to the investor, allowing time to rebalance and restore the minimum investment threshold.
Rebalancing Outcome:
If the investor restores compliance within 30 calendar days, their units will be unfrozen, and no further action will be taken.
If the investor fails to rebalance within the deadline, the AMC will automatically redeem the frozen units at the Net Asset Value (NAV) applicable on the business day following the end of the notice period.
Operational Readiness
SEBI has instructed all AMCs, Registrar and Transfer Agents (RTAs), Depositories, and related entities to implement the required systems immediately. The provisions of this circular come into effect from the date of issuance, i.e., July 29, 2025.
Regulatory Backing
The circular is issued under the authority granted by Section 11(1) of the SEBI Act, 1992, and Chapter VI-C of the SEBI (Mutual Funds) Regulations, 1996, reinforcing SEBI’s commitment to protecting investor interests and ensuring robust market practices.
Conclusion
This move by SEBI underscores its focus on enhancing investor protection, transparency, and operational discipline within India’s mutual fund landscape. For investors in SIFs, the message is clear: maintain the required minimum investments or face automatic redemption. AMCs and other market intermediaries must act swiftly to align their systems and processes with this updated directive.