The Trustee holds the trust and carries the legal responsibility under the Trusts Act. The Investment Manager takes the day-to-day authority from the Trustee under the Investment Management Agreement, and employs the people who do the work. The Investment Committee, where one exists, is the gate an investment passes through. The Sponsor holds the regulated skin in the game, and usually earns the carry.
Signing authority follows the document, and the number of signatures is usually set by the counterparty rather than by SEBI.
The five inside the fund #
The Trustee holds the trust. All legal responsibility under the Trusts Act sits with it, and it is paid a trusteeship fee by the Investment Manager or the fund. It is the legal person that contracts on the fund’s behalf, which is why it appears on the Contribution Agreement.
The Investment Manager takes power over day-to-day investment and operational activity from the Trustee, under the Investment Management Agreement, and is paid a management fee for those services. Reg 2(1)(q) describes the manager as "appointed by the Alternative Investment Fund"; since the fund is the trust, the agreement runs between the Trustee and the IM. Under Reg 20(6) the Manager is responsible for ensuring that every decision of the fund complies with the policies and procedures laid down for it.
The Investment Committee may be constituted by the Manager under Regulation 20(7); it is not compulsory. Where a fund has one, an investment does not proceed without its agreement. Members may be internal or external.
The Investment Manager’s own people. The IM entity employs the Fund Investment Head, the Compliance Officer and the operations teams. They are the IM’s staff, not the fund’s.
The Sponsor entity is how the fund manager holds its regulated skin in the game, the continuing interest required by Reg 10(d). Carry is commonly structured as a separate class of units in the fund, held wherever possible by the same entity that holds the sponsor commitment. The regulation mentions the Sponsor only for continuing interest and for fit and proper, and does not address carry at all.
What the Investment Committee binds #
Two things are true at once, and missing either produces a wrong answer.
An Investment Committee is optional. Regulation 20(7) says the Manager may constitute one. A fund without one is not irregular.
Where a fund has one, it is a gate. The investment does not happen without its go-ahead, and under Regulation 20(8) the Committee’s decisions must comply with the fund’s own policies and procedures.
Two carve-outs sit alongside this. Regulation 20(8) does not apply where every investor other than the Manager, Sponsor and their employees and directors has committed not less than ₹70 crore and furnished a waiver, or where the fund is a large value fund for accredited investors.
An external member whose name is not in the placement memorandum or the investor agreement at on-boarding can be appointed only with the consent of at least 75% of investors by value.
The Compliance Officer’s reporting line #
Under Reg 20(17) the Manager appoints a Compliance Officer, who monitors compliance with the Act, the rules, the regulations and the Board’s circulars and directives.
Regulation 20(19) then requires that officer to report any non-compliance to SEBI immediately and independently, and no later than seven working days from observing it.
The officer is employed by the Investment Manager and the reporting obligation under Regulation 20(19) runs to the Board rather than to the employer. The role therefore carries a statutory duty of its own, with a defined deadline, and is not purely administrative.
The external parties #
| Custodian — registered with SEBI, for safekeeping of the fund’s securities | Mandatory |
|---|---|
| Independent valuer — values the fund’s investments; the Manager appoints one that meets SEBI’s criteria | Mandatory |
| Auditor — a qualified auditor; the fund’s books of account are audited annually | Mandatory |
| Registrar and Transfer Agent — chiefly liaison with NSDL and CDSL for the issue of units; often investor onboarding and reporting as well | Optional |
| Fund Accountant — frequently kept in-house | Optional |
| Legal and tax advisers — retainer or ad hoc; some funds carry internal teams | Optional |
| Merchant banker — filings, including the scheme filing under Regulation 12 | Where required |
| SEBI, the Income Tax Department, the RBI — the RBI where there is foreign investment or payment | — |
A custodian has been mandatory for every AIF since 5 January 2024, and the prior text required one only where corpus exceeded ₹500 crore. Regulation 20(11) scopes the appointment to safekeeping of the securities; where a custodian also holds or monitors the fund’s bank accounts, that is a commercial arrangement rather than a requirement of this regulation.
and since Nov 2025
A further requirement inserted with effect from 19 November 2025 places a duty on the Trustee, trustee company, board of directors or designated partners to ensure that the assets and liabilities of each scheme are segregated and ring-fenced from other schemes, and that each scheme’s bank accounts and securities accounts are segregated and ring-fenced. The duty sits with the Trustee, not with the Custodian.
The valuer is required by the regulations rather than chosen by practice. Under Regulation 23(2) a Category I or Category II fund values its investments through an independent valuer, and Regulation 23(4) places the appointment on the Manager: the valuer must satisfy criteria SEBI specifies. The obligation runs in the other direction as well, since the Code of Conduct in the Fourth Schedule requires the Manager to give the valuer inputs that are not misleading.
Who signs #
Signing authority follows the document, and the question to ask first is which entity the document binds.
The Contribution Agreement binds the trust along with the scheme, so three parties sign: the Investor, the Trustee, and an authorised signatory of the Investment Manager.
Every other investment or operational document for the scheme or the fund is signed by an authorised signatory of the Investment Manager.
How many signatures is usually not a SEBI question
The number is set in one of two places, and often both.
The board resolution of the Investment Manager sets the IM’s own governance: who may sign, for what, and how many of them.
The accepting authority sets its own requirement, and this is the one an administrator meets daily. Banks and custodians generally require two signatories on their documentation and on the execution of any instruction. That requirement is what produces maker-checker on the custody portal. The NSDL and CDSL portals work the same way.
The two-person control an administrator works inside daily therefore originates with the counterparty’s own requirements and with the Investment Manager’s board resolution, rather than with the AIF Regulations.
Common errors #
Treating the Investment Manager as the party with legal responsibility
The IM holds the authority. The Trustee holds the legal responsibility under the Trusts Act. They are different entities with different liabilities, and the Contribution Agreement reflects that by carrying both signatures.
Assuming an Investment Committee is compulsory
Regulation 20(7) makes it optional. The error runs the other way too: where a fund has one, treating its approval as advisory.
Looking for maker-checker in the AIF Regulations
The two-signature rule on a custody or depository portal comes from the counterparty, or from the Investment Manager’s own board resolution.
Reading the Compliance Officer as an administrative role
The obligation under Regulation 20(19) runs to SEBI, independently of the employer, within seven working days.
Common questions #
Who signs a Contribution Agreement?
Three parties: the Investor, the Trustee, and an authorised signatory of the Investment Manager. The agreement binds the trust along with the scheme, which is why the Trustee is a party.
Is an Investment Committee mandatory?
No. Regulation 20(7) provides that the Manager may constitute one. Where a fund has one, an investment does not proceed without its agreement.
Who appoints the Compliance Officer?
The Manager, under Regulation 20(17). The officer is employed by the Investment Manager but must report non-compliance to SEBI independently, within seven working days.
Is a custodian mandatory for an AIF?
Yes, for every AIF since 5 January 2024. Before that the requirement applied only where corpus exceeded ₹500 crore.
Is an independent valuer mandatory for an AIF?
For Categories I and II, yes. Regulation 23(2) requires their investments to be valued by an independent valuer, and Regulation 23(4) places the appointment on the Manager. For Category III, the proviso to Regulation 23(3) requires one for unlisted securities and listed debt securities.
Is an RTA mandatory for an AIF?
No. An RTA is commonly appointed to liaise with NSDL and CDSL for the issue of units, and often to handle investor onboarding and reporting, but the regulations do not require one.
Continue the series
Read the source
Fundclair records who approved what and when, so the maker-checker a custodian imposes on its own portal is matched by a record on the fund’s side. See how it works