SEBI’s Revised Accredited Investor Framework: Manager Certification & Securities Exposure Thresholds

The Securities and Exchange Board of India has circulated a detailed Board Memorandum outlining proposed changes to the existing Accredited Investor (AI) framework. These proposals are not yet in force; they represent regulatory ideas that will require formal approval and subsequent implementation through amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations) and operational circulars.

The central themes of the proposals are:

  • Allowing investment Managers to directly determine and record an investor’s AI status as an additional route;
  • Bringing in “securities market exposure” as a fresh financial eligibility test;
  • According deemed AI status to all Persons Resident Outside India (PROI) as defined under the Foreign Exchange Management Act, 1999 (FEMA); and
  • Recognising Accredited Investor status for certain Limited Liability Partnerships (LLPs) on a look-through basis.

The broader regulatory intent is to simplify the accreditation process, expand access for sophisticated investors, and deepen the domestic risk-capital ecosystem, while maintaining investor protection and regulatory integrity.

1. Policy Objective Behind the Proposals

The stated aims of SEBI’s proposals are to:

  • Reduce friction and compliance burden in the existing accreditation mechanism.
  • Broaden the base of sophisticated investors who can access complex or lightly regulated products such as AIFs, Portfolio Management Services (PMS), Angel Funds, Co-investment Vehicles and Specialised Investment Funds (SIFs).
  • Maintain strong safeguards in respect of verification, documentation, conflicts of interest and accountability, especially if Managers themselves are allowed to grant accreditation.
  • Leverage digital infrastructure and securities market data (eCAS, broker statements) to establish investor capacity and market familiarity.

These objectives stem from SEBI’s larger agenda of improving the ease of doing business in the securities market and increasing the pool of long-term risk capital available to the Indian economy.

2. Snapshot of the Existing Accredited Investor Regime

2.1 Concept and Rationale

The Accredited Investor regime, introduced in 2021 through amendments to the AIF Regulations, SEBI (Portfolio Managers) Regulations, 2020 and SEBI (Investment Advisers) Regulations, 2013, is designed to:

  • Identify investors who possess sufficient financial strength and sophistication to participate in complex, higher-risk or less-regulated investment structures.
  • Grant such investors regulatory relaxations (for example, lower minimum ticket sizes or greater contractual flexibility) on the assumption that they can protect their own interests more effectively than retail participants.

Globally, similar frameworks exist under different labels (e.g., “accredited investor”, “professional client”), and they commonly rely on financial capacity as an objective indicator of sophistication and loss-bearing ability.

2.2 Statutory Definition under AIF Regulations

Regulation 2(1)(ab) of the AIF Regulations currently defines an “accredited investor” by reference to financial thresholds and a certificate granted by an SEBI-recognised Accreditation Agency. The qualifying criteria include:

  • For individuals, Hindu Undivided Families, family trusts and sole proprietorships:

    • Annual income of at least two crore rupees; or
    • Net worth of at least seven crore fifty lakh rupees, with not less than three crore seventy five lakh rupees in financial assets; or
    • Annual income of at least one crore rupees and minimum net worth of five crore rupees, with at least two crore fifty lakh rupees in financial assets.

  • For body corporates: net worth of at least fifty crore rupees.

  • For trusts (other than family trusts): net worth of at least fifty crore rupees.

  • For partnership firms under the Indian Partnership Act, 1932: each partner must independently satisfy the eligibility criteria.

Certain categories, such as Central and State Governments, specified governmental funds, qualified institutional buyers as defined under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Category I foreign portfolio investors, sovereign wealth funds and multilateral agencies, are treated as deemed Accredited Investors and are exempt from obtaining an accreditation certificate.

2.3 Accreditation Agency Route – Present Modus Operandi

Currently, a prospective AI must:

  1. Approach an Accreditation Agency (a subsidiary of a recognised stock exchange or depository, such as CDSL Ventures Limited (CVL) or NSDL Database Management Limited (NDML));
  2. Submit documentary evidence of income and/or net worth;
  3. Obtain a formal Accreditation Certificate after verification.

During this verification period, a Manager may tentatively onboard the investor as an AI, but any actual drawdown or investment in products that rely on AI status can only proceed after the Agency certificate is produced.

2.4 Core Principles of the Existing Framework

The operating model of the existing AI framework rests on the following pillars:

  • Independent verification: Accreditation is issued by entities detached from product manufacture and distribution, giving credibility to the process.
  • Investor declaration: The investor must accept the consequences of being treated as an AI.
  • Uniform standards: Centralised accreditation through common agencies promotes consistency across intermediaries and products.
  • Portability: A valid certificate can be used across multiple schemes, Managers and intermediaries during its term.
  • Financial criteria focus: Objective income/net worth tests are favoured over subjective knowledge tests to reduce interpretational variance and disputes.

2.5 Role of AI Status in Market Access

Accredited Investor status is now an entry condition for various segments and relaxations, including:

  • AIFs, LVFs and ‘AI only’ schemes: Waiver of minimum commitment of INR 1 crore in standard AIFs, flexibility in structures and documentation.
  • SIFs: Relaxed minimum investment thresholds versus ordinary schemes (INR 10 lakh baseline).
  • PMS: Exemption from the usual minimum of INR 50 lakh, and in case of large value AIs, ability to hold up to 100% in unlisted securities in non-discretionary PMS (instead of the general 25% cap).
  • Special Situation Funds: Lower minimum ticket size (INR 5 crore for AIs versus INR 10 crore for others).
  • Angel Funds: Investment access restricted to AIs, coupled with treatment of AIs as Qualified Institutional Buyers for Angel Fund purposes under the SEBI (ICDR) Regulations, 2018.
  • Co-investment Vehicles (CIVs): Co-investments allowed only where the co-investor qualifies as an AI.

Nevertheless, while AI usage has grown, the accredited investor count is still modest relative to potential capacity. The number rose from 649 (as on May 29, 2025) to 4,492 (as on August 28, 2026), with AIs holding Alternative Investment Fund units of roughly INR 2.31 lakh crore (par value) as of July 31, 2026, about one-third of all AIF investments.

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