The Securities and Exchange Board of India (Sebi) has provided relief to Alternate Investment Funds (AIFs) over how to apply the new “pro-rata rights” rule introduced in December 2024, in a consultation paper released on Friday.

The market regulator seeks to clarify how AIFs should maintain pro-rata rights of investors while investing and distributing returns, a requirement that has raised concerns in the industry on operational implementation. Pro-rata rights require profits and losses to be shared in proportion to each investor’s committed capital.

The paper proposes that AIFs may interpret an investor’s “commitment” either as the total amount promised to the fund or as the “undrawn commitment”—the portion not yet called by the fund— when drawing down capital and distributing investm

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