SEBI settles AIF rule case with Singularity AMC for Rs 40.5 lakh

The Enforcement Action

The Securities and Exchange Board of India (SEBI) on 12 October 2026 published two settlement orders in respect of Singularity AMC LLP, the Mumbai-based manager of a family of alternative investment funds, closing two sets of enforcement proceedings over alleged breaches of India's AIF rules for a combined Rs 40.5 lakh. The first order, numbered SO/PSD/2026-27/8658, relates to the Singularity Equity Fund and settles for Rs 9,37,500. The second, SO/PSD/2026-27/8671, relates to the Singularity Growth Opportunities Fund and settles for Rs 31,12,500. Both orders were signed by whole-time members Kamlesh C. Varshney and K.V.R. Murty and take effect immediately.

Crucially, both matters were resolved under the SEBI (Settlement Proceedings) Regulations, 2018 on a "neither admitting nor denying" basis. No finding of wrongdoing was recorded against the firm. According to the orders, Singularity AMC LLP (PAN AEIFS7280J) filed suo-motu settlement applications to settle enforcement proceedings that "may be initiated" against it for the alleged defaults, rather than contest them. In regulatory terms the firm chose a voluntary route to close the matter without any adjudication of fact or law.

The alleged defaults in both orders concern regulation 10(d) of the SEBI (Alternative Investment Funds) Regulations, 2012, read with the Master Circular for AIFs dated 7 May 2024. This is the "continuing interest", or skin-in-the-game, requirement that obliges a fund's manager or sponsor to keep its own capital invested alongside outside investors. Singularity AMC has not issued a separate public statement beyond its settlement applications.

How the Scheme Worked

The two orders turn on how the continuing-interest rule applied to two different categories of fund and how, per SEBI's examination, the schemes fell short.

The first matter concerns Singularity Equity Fund - I, a scheme of the Singularity Equity Fund, registered with SEBI as a Category III Alternative Investment Fund with Singularity AMC LLP as its manager. Regulation 10(d) read with clause 11.1.2 of the Master Circular requires the manager or sponsor of a Category III AIF to maintain a continuing interest of not less than five percent of the corpus or ten crore rupees, whichever is lower. Per the order, upon examination of the fund's Quarterly Activity Report it was noted that the fund failed to maintain that continuing interest for the quarters beginning September 2023 up to June 2024.

The second matter concerns the Singularity Growth Opportunities Fund, registered as a Category II AIF, and specifically three of its schemes: Singularity Growth Opportunities Fund II, Singularity Early Opportunities Fund and the Founders Collective Fund. Here the same regulation requires that the continuing interest of the sponsor or manager be pro-rata to the amount raised from other investors. According to the order, examination of the Quarterly Activity Reports noted that the drawdowns made by the manager in the three schemes were not pro-rata to the drawdowns made from other investors. In case of Singularity Growth Opportunities Fund II and Singularity Early Opportunities Fund the lapse was observed for the quarters ended June 2024 to June 2025, and for the Founders Collective Fund for the quarters ended June 2024 to September 2024.

The procedural history is set out in both orders. Following the suo-motu applications (numbered 8658/2025 and 8671/2025), SEBI's Internal Committee met the firm's authorised representatives on 11 March 2026 to deliberate the terms. The firm filed revised settlement terms on 24 March 2026. The High Powered Advisory Committee considered and recommended the terms on 27 May 2026, and the Panel of Whole Time Members approved them on 2 July 2026. A notice of demand was then issued, the amounts were remitted, and SEBI confirmed receipt before passing the orders.

The Law Invoked

The orders cite a focused set of provisions. The substantive requirement is regulation 10(d) of the SEBI (Alternative Investment Funds) Regulations, 2012, read with clause 11.1.2 of the Master Circular for Alternative Investment Funds dated 7 May 2024. Together these set the continuing-interest, or skin-in-the-game, obligation: the fund manager or sponsor must keep its own money invested, at the prescribed level for Category III funds and pro-rata to outside investors for the pro-rata test applied here.

The settlement itself was passed under section 15JB of the SEBI Act, 1992, which allows SEBI to settle administrative and civil proceedings, read with section 19 of the Act on delegation of powers. The mechanics were governed by the SEBI (Settlement Proceedings) Regulations, 2018: regulation 10 and Schedule II for computing the amount, regulation 15 for approval by the panel, regulation 23 for the order, and regulation 25 for its publication. The orders also preserve SEBI's rights under regulations 28 and 31 of those Settlement Regulations.

What Happens Next

Because these are settlement orders rather than contested adjudications, the matter is, for practical purposes, closed. Each order directs that SEBI "shall not initiate any enforcement action against the Applicant for the said violations". There is no appeal to pursue, since a settlement is the applicant's own voluntary resolution rather than an adverse finding imposed on it.

That closure is conditional. Both orders state that they are passed without prejudice to SEBI's right under regulations 28 and 31 of the Settlement Regulations to initiate appropriate action if any representation made during the settlement is later found to be untrue, if the firm breaches any undertaking given, or if it fails to pay any difference arising from a discrepancy in the settlement terms. The orders took effect immediately and copies are to be sent to the firm and published on SEBI's website.

For investors in the funds, a settlement of a continuing-interest lapse does not of itself disturb the schemes' operation. The firm remains a registered AIF manager subject to the usual ongoing reporting obligations, including the Quarterly Activity Reports through which the lapses were noted.

What It Means

The continuing-interest rule exists to protect investors. By requiring a manager to keep its own capital invested alongside, and in step with, outside money, it aligns the manager's incentives with those of its investors so that the people running the fund share in both the upside and the downside. A lapse in that alignment, even a technical one picked up from routine filings, is precisely the kind of issue SEBI's periodic review of Quarterly Activity Reports is designed to catch.

For the typical AIF investor, who commits at least Rs 1 crore to access these funds, the practical takeaway is twofold. First, AIFs are closely reported vehicles whose managers must demonstrate skin in the game quarter by quarter, and SEBI reads those returns. Second, anyone evaluating or already invested in an AIF can verify the fund's standing directly on SEBI's public register of alternative investment funds, and can ask a manager how its continuing interest is maintained across each scheme. The episode is best read not as alarm but as evidence that the monitoring framework for privately pooled capital is working.

FAQ

Does the settlement mean Singularity AMC did something wrong?

No finding of wrongdoing was recorded. Both orders were settled on a "neither admitting nor denying" basis under the SEBI (Settlement Proceedings) Regulations, 2018. The firm applied on its own initiative to settle proceedings that "may be initiated" for alleged violations, and SEBI agreed, without adjudicating the facts or law. A settlement closes the matter without an admission of guilt.

What exactly did SEBI order?

SEBI passed two settlement orders dated 12 October 2026. In the Singularity Equity Fund matter (SO/PSD/2026-27/8658) the firm paid Rs 9,37,500, and in the Singularity Growth Opportunities Fund matter (SO/PSD/2026-27/8671) it paid Rs 31,12,500, a combined Rs 40.5 lakh. Both settle alleged breaches of the AIF continuing-interest requirement under regulation 10(d).

Can a settlement order be appealed?

A settlement is the applicant's own voluntary resolution, so there is no adverse finding to appeal. However, the orders are not unconditional: SEBI retains the right under regulations 28 and 31 of the Settlement Regulations to take action later if any representation made during settlement proves untrue, if an undertaking is breached, or if a payment discrepancy is not met.

What is the "continuing interest" rule and why does it matter?

Regulation 10(d) of the AIF Regulations, read with the Master Circular, requires a fund manager or sponsor to keep its own capital invested in the fund, five percent of the corpus or Rs 10 crore (whichever is lower) for Category III funds, and pro-rata to outside investors on the drawdown test. It is a skin-in-the-game rule that aligns the manager's interests with those of its investors.

How can I check if an AIF is registered with SEBI?

SEBI publishes a register of alternative investment funds and intermediaries on its official website, sebi.gov.in. Prospective and existing investors can confirm a fund's registration category and status there, and can ask the manager directly how it maintains its continuing interest across each scheme.

Where can I read the official orders?

Both settlement orders are published on SEBI's website: the Singularity Equity Fund order and the Singularity Growth Opportunities Fund order, each dated 12 October 2026 and signed by whole-time members Kamlesh C. Varshney and K.V.R. Murty.

This report is based on the official SEBI settlement orders dated 12 October 2026 in the matter of the Singularity Equity Fund and the Singularity Growth Opportunities Fund. It was surfaced via coverage in The Economic Times.