The Securities and Exchange Board of India (Sebi) has simplified accredited investor onboarding by allowing investment managers to complete key processes before certification is issued, a move expected to ease delays for alternative investment funds (AIFs) and reduce friction for high net worth investors accessing private market products.
The changes, notified through a circular on Friday, come amid sustained industry feedback that the accreditation framework, introduced in 2021, had become cumbersome and operationally inefficient. The changes take effect immediately.
Under the revised framework, AIF managers will be allowed to proceed with key onboarding steps even before an investor formally receives an accreditation certificate from a recognized agency. Based on their own assessment of whether an investor meets the eligibility criteria, managers can now finalize and execute contribution agreements and initiate related operational processes while the accreditation certificate is awaited.
Sebi has drawn clear guardrails in its circular. Any commitments made by such investors cannot be counted towards the scheme’s corpus until the accreditation certificate is issued, and funds can be accepted only after certification is completed.
Mint had reported in December that a top Sebi committee was close to deciding whether AIFs should be allowed to fully certify accredited investors, similar to the framework followed in GIFT City.
Documentation eased, compliance tightened
Accredited investors are individuals or entities that meet specified income or net worth thresholds and are presumed to have the financial capacity and understanding to invest in higher-risk products. Under the current framework, accreditation is carried out only by recognized agencies, which include subsidiaries of stock exchanges and depositories.
Sebi has also eased documentation requirements linked to accreditation based on net worth criteria. Earlier, a detailed break up of net worth was attached as an annexure to the net worth certificate issued by a chartered accountant. Based on market representations, the regulator has now done away with this requirement. It has clarified that it is optional for chartered accountants to specify the exact net worth figure in the certificate, as long as they confirm that the applicant meets the prescribed threshold.
The circular also places the onus on AIF trustees, sponsors and managers to ensure compliance with the revised requirements through the compliance test report, a key internal control mechanism prescribed under Sebi’s master circular for AIFs.
