SEBI’s Board approves changes to the regulatory framework for accredited investors

On 13 August 2026, SEBI issued a consultation paper (‘Consultation Paper’) inviting public comments on proposals to modify and improve its current regulatory framework for accredited investors. Pursuant to the Consultation Paper, SEBI’s Board, at a meeting held on 24 September 2026, approved a number of changes to the regulatory framework for accredited investors. Some of the key changes approved by SEBI’s Board are:

Accreditation by Managers

At present, investors are required to obtain an accreditation certificate from an accreditation agency and then complete onboarding with the manager of the alternative investment fund (‘AIF’), specialised investment fund (‘SIF’) or portfolio management service (‘PMS’). After the decision made by SEBI’s Board is implemented, the manager of an AIF, SIF or PMS may determine and record an investor’s accredited status as part of onboarding, or during the tenure of an ongoing scheme. Accreditation by a manager would be valid for three years from the assessment date.  The ‘Manager’ would be recognised at group level, allowing the status to extend across AIF, SIF and PMS managers within the same group. The assessment would use the latest Income Tax Returns (‘ITR’), a CA net-worth certificate not older than six months, or recent eCAS/broker statements or a CA certificate for securities-market assets.

A fresh accreditation assessment would be required whenever an investor is onboarded by an unrelated manager. Since an investment manager has a commercial incentive to onboard the investor, the manager-led accreditation model may give rise to potential conflicts of interest. To address this, SEBI had proposed (in the Consultation Paper) a set of safeguards, which include the following:

(i) managers have to put in place a formal accreditation policy;

(ii) records relating to accreditation be retained for a minimum period, to be prescribed by SEBI;

(iii) accreditation processes be subjected to periodic internal audit and compliance review; and

(iv) managers obtain annual certification from an independent auditor confirming compliance with the accreditation requirements.

Continuation of the accreditation agency route

SEBI has retained the existing independent Accreditation Agency route in parallel with the manager-led accreditation option. Investors may continue to obtain a portable certificate from a recognised Accreditation Agency rather than be assessed separately by a manager. The validity norms for accreditation granted by an Accreditation Agency would be aligned with the validity norms for manager-led accreditation for the manager’s own schemes.

Securities Market Assets as an additional eligibility criterion

SEBI has added a standalone accreditation route, which permits accreditation based on the investor’s securities-market assets. Under this route, individuals, HUFs, family trusts and sole proprietorships should have securities-market assets worth at least ₹5 crore and a body corporate should have securities-market assets worth ₹20 crore. Qualifying assets would include dematerialised equity and debt instruments, REIT, InvIT and AIF units, mutual-fund folios, futures open-interest positions, dematerialised unlisted securities and overseas securities-market investments. Eligibility may be evidenced by an eCAS/broker statement not older than six months or a practising CA’s certificate. Until now, accreditation has been provided on the basis of either income or net worth.

An asset-backed accreditation test does not take into account liabilities, leverage or encumbrances and may therefore overstate an investor’s ability to absorb losses. If an investor is given accreditation solely on the basis of the investor’s securities-market assets, it is possible that investors with extensive liabilities or even negative net worth may nevertheless qualify for accreditation.

Deemed accreditation for all persons resident outside India

SEBI’s Board has approved the extension of deemed Accredited Investor status to every ‘person resident outside India’ (‘PROI’), including all Foreign Portfolio Investors. Accordingly, a PROI would not need a separate accreditation certificate.

Look-through accreditation for LLPs

A limited liability partnership (‘LLP’) can qualify as an accredited investor if every partner independently satisfies the accreditation criteria. This new rule places LLPs on a footing similar to partnership firms under the current framework. Until now, an LLP is required to have a net worth of INR 50 crore or more to be accredited, whilst a general partnership firm will be accredited if each partner independently meets the eligibility criteria for accreditation.

Accreditation of a wholly owned subsidiary based on parent net worth

The Consultation Paper had proposed that the wholly owned subsidiary of an accredited company shall be treated as accredited on the basis that its parent company has satisfied the prescribed net-worth criterion. SEBI’s press release with details of key decisions made at its Board meeting on 24 September 2026 is silent on this point and it remains to be seen if this proposal will be implemented.

Implementation of changes to SEBI’s regulatory framework for accredited investors

Implementation of the decision taken by SEBI’s Board on 24 September 2026 will require amendments to the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 (‘AIF Regulations’), the SEBI (Investment Advisers) Regulations, 2013 (‘IA Regulations’) and SEBI (Portfolio Managers) Regulations, 2020 (‘PMS Regulations’).

Regulation 2(1) (ab) of the AIF Regulations, which defines ‘accredited investors’, was inserted in the AIF Regulations with effect from 3 August 2021, by the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2021. The same definition was inserted (by reference to the definition in the AIF Regulations) in the IA Regulations and the PMS Regulations on the same day (3 August 2021) through amendments to the regulations. SEBI subsequently issued its implementation circular, ‘Modalities for implementation of the framework for Accredited Investors,’ dated 26 August 2021, which set out the process of being accredited through an accreditation agency. The aforementioned circular has been incorporated in SEBI’s Master Circulars for AIF, PMS and Investment Advisers. Implementation of the decision taken by SEBI’s Board on 24 September 2026 will also require amendments to these aforementioned master circulars.

[The first author is a Partner, while the other two are Associates in the Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys] 

SEBI’s press release with details of key decisions made at its Board meeting on 24 September 2026 can be found here.