SEBI Eases Accredited Investor Norms: Fund Managers Now Can Certify Eligibility

One of the most pivotal changes is the introduction of "Manager-led accreditation." Previously, investors relied heavily on accreditation agencies. Now, the following entities can determine and record an investor's status during onboarding or throughout the tenure of a scheme:

• Managers of Alternative Investment Funds (AIFs)
• Asset management companies of Specialized Investment Funds (SIFs)
• Registered portfolio managers

SEBI clarified that this manager-led route is an optional addition; the existing Accreditation Agency route remains available for those who prefer it. However, there are specific conditions attached to this new power. Accreditation granted by a manager is valid for three years and is recognized across managers within the same corporate group. If an investor moves to a manager outside that specific group, a fresh assessment will be required.

New Exposure Thresholds: The Rs 5 Crore Mark

To define who qualifies as an accredited investor, SEBI has introduced specific securities market exposure thresholds. Eligibility is now tied to the following minimums:

• Individuals, HUFs, Family Trusts, or Sole Proprietorships: Minimum qualifying exposure of INR 5 crore.
• Body Corporates or Non-Family Trusts: Minimum qualifying exposure of INR 20 crore.

What Counts as Qualifying Exposure?

The regulator has provided a broad definition of what constitutes "exposure" to ensure various asset classes are considered. This includes:

• Securities held in dematerialised form
• Mutual fund investments
• Unlisted securities
• Investments in overseas securities markets
• Investments under the National Pension System (NPS)

Verification and Documentation

Investors can prove their eligibility through several channels, including audited financial statements, income tax returns, or certificates from practicing chartered accountants. For those qualifying via securities market exposure, SEBI requires either a chartered accountant's certificate or an electronic Consolidated Account Statement (eCAS) summary that is no older than six months.

Expanding the Scope: LLPs and Foreign Residents

SEBI has also expanded the circle of who can be an accredited investor:

• Limited Liability Partnerships (LLPs): LLPs can now qualify, provided that every single partner independently meets the eligibility criteria.
• Non-Residents: Persons Resident Outside India (as defined by the Foreign Exchange Management Act, 1999) are now "deemed" accredited investors. They are exempt from obtaining accreditation certificates or undergoing manager-led processes, though they must still comply with anti-money laundering (AML) and source-of-funds verification.

Safeguards and Compliance

To prevent misuse of the manager-led certification process, SEBI has mandated strict safeguards. Managers must implement:

• Periodic internal audits and compliance reviews
• Strict controls to manage conflicts of interest
• Robust grievance redressal mechanisms

Furthermore, managers are required to keep all verification records and supporting documents for at least five years from the date of accreditation, or until five years after the investor leaves the scheme, whichever is later.

For those already in the system, existing accreditation certificates remain valid for their original duration, and those accredited at the time of onboarding will keep their status for the remaining life of the scheme. These new regulations come into force with immediate effect.