Market regulator Sebi on Tuesday introduced a new framework allowing Alternative Investment Funds (AIFs) to retain liquidation proceeds beyond their prescribed fund life under certain conditions and seek an “Inoperative Fund” status, providing greater flexibility during the winding-up process.

The move follows amendments to the existing Sebi rules, and is aimed at addressing practical challenges faced by AIFs while settling liabilities, litigation matters and residual operational expenses after the expiry of a fund’s tenure.

Under the new guidelines, AIFs and their schemes can retain liquidation proceeds beyond the liquidation or dissolution period if they have received litigation notices, regulatory communications, tax-related demands or other legal claims that may result in future liabilities. Funds can also retain proceeds for anticipated liabilities if they secure consent from at least 75% of investors by value.

Sebi has additionally permitted retention of money for residual winding-up expenses, provided the amount is supported by invoices or comparable historical expense records. Such retention for operational expenses cannot continue beyond three years from the end of the permissible fund life.

The regulator said managers must disclose the amount proposed to be retained and the estimated retention period to investors while seeking consent for anticipated liabilities.

To facilitate closure of fund structures, Sebi has also introduced an “Inoperative Fund” category. AIFs that have retained money for pending liabilities and wish to surrender their registration can apply for this status. Funds that do not retain any money but want to continue registration while awaiting the outcome of pending litigation may also seek the designation.
Applications for obtaining the status will have to be submitted directly to Sebi in a prescribed format.Once tagged as an Inoperative Fund, the AIF will not be permitted to launch new schemes and cannot charge management fees on existing schemes. Retained money must be invested only in liquid instruments permitted under Regulation 15(1)(f) of the AIF regulations.

Sebi has simultaneously granted significant compliance relief to such funds. Inoperative Funds will be exempt from several reporting and regulatory requirements, including quarterly and annual activity reports, compliance test reports, performance benchmarking submissions, periodic investor disclosures, valuation requirements and certain certification norms for key investment personnel.

The regulator has, however, mandated annual reporting of retained monies and outstanding liabilities. AIFs and Inoperative Funds must submit a status report to both Sebi and investors within 30 days of the end of every financial year until all liabilities are settled and pending amounts are distributed.

The framework has also been extended to Venture Capital Funds registered under the erstwhile Sebi (Venture Capital Funds) Regulations, 1996.

Industry participants have long sought clarity on handling residual liabilities after the formal investment period ends. In many cases, funds faced delays in winding up because of ongoing tax disputes, litigation or regulatory proceedings even after all investments had been liquidated.

The new circular seeks to address those concerns by providing a structured mechanism for retaining proceeds, reducing compliance burdens and allowing funds to formally transition into an inactive status while resolving outstanding obligations.

The Nasdaq Composite and the S&P 500 finished lower on Tuesday under pressure from technology stocks, while the Dow Jones Industrial Average marked its second straight record close.

After rallying sharply on Monday on optimism about a U.S.-Iran peace deal, investors in the S&P 500 and Nasdaq took a breather even as oil prices fell to their lowest levels since early March. Shares of SpaceX rallied, but ‌pared earlier gains. For much ⁠of ⁠the session, the rocket and AI company’s market value was above that of Amazon and it briefly surpassed Microsoft’s value.

While falling oil prices offered some support to equities, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said it was too difficult to build on recent steep gains in the heavyweight technology sector without a break. He noted some investor caution ahead of the U.S. Federal Reserve’s policy update due on Wednesday afternoon.

“We had a big move yesterday in the market,” said Luschini, alluding to the S&P 500’s 1.65% rally on Monday and Nasdaq’s advance of more than 3%. “We’re just digesting some of those gains and the setup in ⁠anticipation of ‌the Fed meeting is always a little tentative.”

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According to preliminary data, the S&P 500 lost 41.85 points, or 0.55%, to end at 7,512.44 points, while the Nasdaq Composite lost 301.13 points, or 1.15%, to 26,382.81. The Dow Jones ⁠Industrial Average rose 345.54 points, or 0.67%, to 52,016.57.
TECHNOLOGY LAGS, FINANCIALS RISE

Investors rotated into economically sensitive sectors and sold richly valued technology stocks during the session with chip stocks falling sharply after soaring in the prior three sessions. Of the S&P 500’s 11 major industry sectors, financials and industrials rose. U.S. oil futures settled down 5.8% as some details emerged about the U.S.-Iran interim deal, which is expected to extend a tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the U.S. and Israel attacked Iran in February.
U.S. President Donald Trump said the agreement would rule out a nuclear weapon for Tehran, while a U.S. official said ‌that it allows Iran to sell oil upon signing. The war had pushed up oil prices since it started in late February, and fanned worries about sticky inflation, which informs the U.S. central bank’s policy on interest rates. Investors are widely expecting the Fed to hold ⁠interest rates at its current 3.50% to 3.75% range on Wednesday, though they will pay close attention to new Fed Chairman Kevin Warsh’s comments on inflation, unemployment and the economic outlook.

Traders see the Fed holding rates through much of the year but have been betting on a roughly 42% chance of a 25-basis-point rate hike in December, according to CME Group’s FedWatch tool.

In individual stocks, shares of Olin sank after the chemical producer said it would acquire Huntsman in an all-stock deal valued at $2.43 billion. Huntsman shares also fell as the offer stood at a discount to the stock’s recent price.

Yum Brands shares rose after the fast-food company said it would sell its Pizza Hut chain for $2.7 billion, as it struggles with stiff competition and cautious consumer spending.

Q4: 2026-06-16 Earnings Summary

EPS of $1.67 beats by $0.02

 | Revenue of $447.94M (1.21% Y/Y) misses by $2.06M

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