"An Alternative Investment Fund which has been granted registration under a particular category cannot change its category subsequent to the registration." Elucidate the statement.

SEBI has issued guidelines for Alternative Investment Funds (AIFs) to change their registration categories based on risk exposure. These guidelines describe the rules and procedure regarding changes from one category of AIF registration to another. Regulation 7(2) of AIF Regulations specifies that an AIF which has been granted registration under a particular category cannot change its category Subsequent to registration, except with the approval of SEBI. Only AIFs that have not made any investments under their existing category would be allowed to apply for changing their categories. Any AIF proposing to change its category is required to make an application to the SEBI for the same along with the application fees of ₹1 lakh. Additionally, they need to intimate the rationale for the proposed change. In case the AIF has raised funds prior to the application for change in category, the AIF would be required to inform all its investors providing them the option to withdraw their funds garnered without any penalties. Any fees collected from investors seeking to withdraw commitments/funds shall be returned to them. Partial withdrawal may be allowed subject to compliance with the minimum investment amount required under the AIF Regulations. The AIF would not make any investments other than in liquid funds/banks deposits until approval for the change in category is granted by the SEBI. On approval of the request from SEBI, the AIF shall send a copy of the revised placement memorandum and other relevant information to all its investors.