Summary: SEBI’s Board Memorandum on reviewing the Accredited Investor framework proposes amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 and implementation modalities through circulars. The proposals aim to simplify accreditation, broaden participation by sophisticated investors and deepen the pool of risk capital, while retaining safeguards. A Manager would be permitted to determine and record an investor’s accreditation as an optional alternative to the existing independent Accreditation Agency route. Manager-led accreditation would generally require a fresh determination for an unrelated Manager, but could remain valid for three years across investment products of the same Manager or group. The Agency route would remain portable and its validity would also be aligned to three years. Proposed safeguards include verification, records, audits, conflict-of-interest controls and accountability. Securities market exposure would become an additional eligibility criterion, with proposed thresholds of INR 5 crore for individuals, Hindu Undivided Families, family trusts and sole proprietorships, and INR 20 crore for body corporates and other trusts. The Memorandum also proposes deemed Accredited Investor status for all Persons Resident Outside India, including Foreign Portfolio Investors, and a look-through route for Limited Liability Partnerships where every partner independently qualifies. It does not recommend accrediting a wholly owned subsidiary solely on its parent’s net worth. These are proposals for regulatory approval and subsequent implementation, rather than already operative changes.
Securities and Exchange Board of India
Proposals to review the Accredited Investor framework
1. Objective
With an objective of enhancing ease of doing business, widening the participation of sophisticated investors in the securities market and deepening the pool of risk capital available to the economy, this Board Memorandum proposes to amend the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) and to specify the modalities through circular, with a view to:
a) permit a Manager to determine and record the accreditation status of an investor (“Manager led accreditation”), as an additional and optional route alongside the extant Accreditation Agency route, subject to specified validity norms and safeguards;
b) introduce “securities market exposure” as an additional eligibility criterion for accreditation;
c) extend deemed Accredited Investor status to all Persons Resident Outside India (“PROI”) as defined under the Foreign Exchange Management Act, 1999 (“FEMA”), including all Foreign Portfolio Investors (“FPIs”); and
d) recognise a Limited Liability Partnership as an Accredited Investor where each partner independently meets the eligibility criteria for accreditation.
2. Background and extant Accredited Investor framework
2.1. The Accredited Investor (“Al”) framework was introduced by SEBI to identify investors who have the financial capacity and understanding to assess and bear the risks associated with complex investment products and strategies. The framework allows certain regulatory flexibilities to be provided to such investors while maintaining appropriate safeguards and market integrity.
2.2. Securities market regulators globally recognise that investors differ significantly in their ability to understand financial products, assess investment risks, evaluate investment opportunities and absorb financial losses. Accordingly, sophisticated investors are generally allowed to participate in products, structures and investment strategies that may involve greater complexity, lower liquidity, longer investment horizons, concentrated exposures or greater contractual flexibility, i.e. products and avenues that carry relatively more flexibility and lesser regulatory oversight than those meant for retail investors. A comparison of the accredited investor frameworks in other jurisdictions is placed at Annexure A.
2.3. Recognising the above, SEBI introduced a framework for Accredited Investors in 2021 by way of amendments to the AIF Regulations, the SEBI (Portfolio Managers) Regulations, 2020 (PMS Regulations) and the SEBI (Investment Advisers) Regulations, 2013, with the modalities specified through circulars. The framework introduced an objective and independently verified measure of investor sophistication, in addition to the existing measure based on the size of investment or commitment.
2.4. As per Regulation 2(1)(ab) of the AIF Regulations, “accredited investor” means any person who is granted a certificate of accreditation by an accreditation agency who,
2.4.1. in case of an individual, Hindu Undivided Family, family trust or sole proprietorship has: (a) annual income of at least two crore rupees; or (b) net worth of at least seven crore fifty lakh rupees, out of which not less than three crore seventy five lakh rupees is in the form of financial assets; or (c) annual income of at least one crore rupees and minimum net worth of five crore rupees, out of which not less than two crore fifty lakh rupees is in the form of financial assets;
2.4.2. in case of a body corporate, has net worth of at least fifty crore rupees;
2.4.3. in case of a trust other than family trust, has net worth of at least fifty crore rupees;
2.4.4. in case of a partnership firm set up under the Indian Partnership Act, 1932, each partner independently meets the eligibility criteria for accreditation:
Provided that the Central Government and the State Governments, developmental agencies set up under the aegis of the Central Government or the State Governments, funds set up by the Central Government or the State Governments, 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 and any other entity as may be specified by the Board from time to time, shall be deemed to be an accredited investor and may not be required to obtain a certificate of accreditation.
2.5. Under the present arrangement, a prospective investor approaches an Accreditation Agency, being a subsidiary of a recognised Stock Exchange or Depository, which independently verifies the applicant’s income and/ or net worth and issues an Accreditation Certificate. During this period, the Manager may onboard the investor as Accredited Investor, however any drawdown or investment can be made only pursuant to furnishing certificate issued by an Accreditation Agency. Currently, there are two SEBI recognised Accreditation Agencies, viz., CDSL Ventures Limited (CVL) and NSDL Database Management Limited (NDML).
2.6. The extant framework rests on the following regulatory principles:
2.6.1. Independent verification — accreditation status is determined independently of the commercial activities associated with the distribution or management of investment products. An independent validation lends credibility to the determination of risk sophistication, and it is on the strength of that credibility that a lighter-touch regime is extended to such investors and to the Managers serving them.
2.6.2. Investor declaration — the framework also requires the investor’s own affirmation that the investor understands, and is willing to assume, the consequences of being treated as an Accredited Investor.
2.6.3. Uniformity and consistency of standards — a centralised accreditation process administered through recognised Accreditation Agencies promotes consistency in the manner in which eligibility criteria are applied across intermediaries, products and market segments, and reduces the possibility of regulatory arbitrage.
2.6.4. Portability and market efficiency — since accreditation is undertaken independently of any specific product or intermediary, accreditation status may be utilised across multiple products, structures and market participants during the validity period of the accreditation certificate, thereby avoiding repeated eligibility assessments.
2.6.5. Financial capacity as an objective criterion — while sophistication may encompass knowledge, experience and expertise, the framework was deliberately designed around objective financial criteria, on the premise that financial capacity enables investors to hire expert managers/ advisers and to absorb loss, and that financial criteria are less susceptible to interpretational differences across market participants.
2.7. Since its introduction, accreditation has become increasingly relevant across the securities market. Al status is now an important gateway for various investment products, structures and regulatory flexibilities, including AlFs, Portfolio Management Services (“PMS”), Angel Funds, Co-investment Vehicles (“CIVs”), Large Value Funds for Accredited Investors (“LVFs”) and Specialised Investment Funds (“SIFs”). Some of the important flexibilities available to Als are:
(i) No minimum ticket size: the minimum commitment amount of INR 1 crore
applicable to a regular AIF is not applicable to Accredited Investors. Similar dispensation is available under the SIF framework (against an ordinary threshold of INR 10 lakh) and under the PMS Regulations (against an ordinary threshold of INR 50 lakh).
(ii) Special Situation Funds: the minimum ticket size, ordinarily INR 10 crore for Category I AlFs undertaking special situation fund activity, stands reduced to INR 5 crore for Accredited Investors.
(iii) PMS — unlisted securities: against an ordinary limit of 25% of a client’s assets under management under non-discretionary PMS, a portfolio manager may invest up to 100% of assets under management in unlisted securities where the client is a large value Accredited Investor.
(iv) Angel Funds: Angel Funds may onboard and offer investment opportunities only to Accredited Investors. To facilitate this without breaching the private placement limit of 200 investors under the Companies Act, 2013, Als are treated as Qualified Institutional Buyers for the limited purpose of Angel Fund investments under the SEBI (ICDR) Regulations, 2018.
(v) Co-investment: the CIV framework, which enables co-investment by AIF investors, has been permitted only where the co-investing investor is an Accredited Investor.
(vi) Al only schemes and LVFs: In ‘Al only’ schemes, accreditation serves as the gateway to greater product and contractual flexibility.
2.8. Despite its growing importance, the number of accredited investors, though rising, remains modest relative to the potential investor base. The number of Als increased from 649 as on May 29, 2025 to 4,492 as on August 28, 2026. Als held AIF units with a par value of approximately INR 2.31 lakh crore as on July 31, 2026, representing nearly 33% of total AIF investments.
3. Representations received from stakeholders
3.1. SEBI has been engaging with industry participants to understand the progress of accreditation and identify ways to make the framework easier and more efficient. Representations received from industry associations, including those representing the AIF and PMS industry, inter alia highlight the following issues:
3.1.1. Duplication of touchpoints at the Accreditation Agency and the AIF Manager for onboarding as an accredited investor;
3.1.2. Limited validity of accreditation;
3.1.3. Limited number of accreditation agencies and process inefficiencies; 3.1.4. High cost of accreditation;
3.1.5. Accreditation based on financial assets, as an additional criterion; 3.1.6. Reliance on digital infrastructure for financial information;
3.1.7. Expansion of eligibility criteria for foreign pooled investment vehicles based on AUM;
3.1.8. Expansion of the universe of deemed accredited investors; and
3.1.9. Permitting CA-equivalent international bodies to certify net worth of foreign investors.
3.2. These representations have been perused and examined, and subsequently the following proposals were placed before SEBI’s Alternative Investment Policy Advisory Committee (“AIPAC”):
3.2.1. Manager led accreditation;
3.2.2. Introduction of a new eligibility criterion based on securities market exposure; and
3.2.3. Deemed accreditation for Persons Resident Outside India.
3.3. AIPAC broadly agreed with the proposals. A few suggestions put forward by AIPAC have been incorporated, and the proposals have been suitably modified as discussed in the paragraphs below.
3.4. AIPAC also discussed a representation from some industry participants that the eligibility criteria may be brought down, specifically for Angel Funds, given that investors often take small bets in start-ups. It was discussed that Angel Funds generally carry higher risks by virtue of investing exclusively in start-ups, and hence it may not be suitable to review the eligibility criteria specifically for Angel Funds.
3.5. In this regard, it was decided that eligibility criteria for accreditation may be kept consistent across all products, including Angel Funds, for maintaining regulatory simplicity and ease of compliance.
3.6. Accordingly, a consultation paper was issued on August 13, 2026 on `Review of the Accredited Investor Framework’, inviting public comments till September 03, 2026 (copy placed at Annexure B).
3.7. A total of 486 responses were received on the ten proposals set out in the consultation paper, from 58 respondents comprising AIFs and their Managers, portfolio managers, industry associations, market infrastructure institutions, Accreditation Agencies, stock brokers, professional bodies, law and consultancy firms and individual investors.
3.8. A detailed summary of the public comments received, along with SEBI’s views thereon, is placed at Annexure C. Taking into account the recommendations of AIPAC, the public comments received and internal deliberations, the specific issues, the major suggestions received and SEBI’s views on the same are discussed, proposal-wise, in the paragraphs below.
4. Proposals
4.1. Manager led accreditation
Issues under consideration
4.1.1. Stakeholders have represented that under the present arrangement, a prospective investor approaches an Accreditation Agency which independently verifies the applicant’s income and/ or net worth and issues an Accreditation Certificate. During this period, the Manager may onboard the investor as Accredited Investor, however any drawdown/investment can be made only pursuant to furnishing certificate issued by an Accreditation Agency. It has been submitted that much of the information required for accreditation, including KYC, financial information and supporting documentation, is already collected by intermediaries and investment managers during onboarding. This results in duplication of documents, additional costs, longer timelines and multiple touchpoints for investors. Industry has therefore suggested that accreditation should be integrated with onboarding by the Manager.
4.1.2. Stakeholders have also stated that the current validity period of accreditation results in repeated compliance requirements and submission of financial information.
4.1.3. At the same time, accreditation forms the basis for extending regulatory flexibilities and, in certain cases, for permitting departures from protections otherwise available to investors. Therefore, simplification of the process needs to be balanced with the need to maintain the integrity and credibility of Accredited Investor status.
Proposal 1: Permitting a Manager to determine and record accreditation status
4.1.4. To address the difficulties arising from the separation of accreditation from onboarding, the limited number of Accreditation Agencies, the cost and recurring compliance requirements, and the periodicity of accreditation, it is proposed that a Manager may be permitted to determine and record the accreditation status of an investor in an investment product.
4.1.5. As referred above, the benefit of accreditation is extended to investors in investment vehicles viz. AIFs, SIFs and PMS. For ease of reference, the investment manager/ asset management entity of these vehicles is hereinafter collectively referred to as the “Manager”.
4.1.6. A Manager may also recognise an investor as Al during the tenure of an existing scheme, subject to the investor satisfying the prescribed eligibility criteria. Under the existing framework, once an investor is recognised as an Al in a scheme, the status continues for the remaining life of that scheme, even if the investor subsequently no longer satisfies the financial criteria on which the accreditation was originally based.
4.1.7. The proposal is expected to reduce duplication of documentation arising from two separate touchpoints in the current framework, improve operational efficiency and facilitate wider adoption of the Accredited Investor framework.
4.1.8. A total of 53 entities have commented on the proposal to permit a Manager to determine and record the accredited status of an investor. In this regard, 46 entities have favoured the proposal, while 7 entities have disagreed with the proposal.
4.1.9. A number of respondents supported the proposal, noting that Managers already undertake verification of an investor’s financial position and other KYC/ AML requirements at the time of onboarding, and that requiring investors to separately approach an Accreditation Agency results in duplication of verification, additional cost and delay. It was also commented upon that the limited number of Accreditation Agencies constrains capacity, and that permitting Managers to undertake accreditation would improve accessibility.
4.1.10. The dissenting commenters submitted that accreditation is founded on independent, third party review, and that the Manager is an interested party in that it benefits from more investors qualifying for accreditation. An alternative was suggested: that a Managers determination may operate as a preliminary step only, to be confirmed by an Accreditation Agency within a specified period.
SEBI’s views:
4.1.11. The concern regarding potential conflict of interest was recognised while formulating the proposal and was also considered in the consultation paper. The safeguards discussed in the paragraphs below are intended to address it, and would include a laid down accreditation policy separating the accreditation function from business development, maintenance of records, audit and a clear accountability framework.
4.1.12. Further, the Manager already has an established relationship with the investor and undertakes investor level verification as part of onboarding and its continuing regulatory obligations. Requiring every Manager led determination to be independently confirmed by an Accreditation Agency, would substantially dilute the intended objective of the proposal, namely to reduce duplication, cost and timelines in the accreditation process. Manager led accreditation is proposed as an additional route and would not replace the existing Accreditation Agency mechanism.
Proposal 2: Validity of Manager led accreditation and documents for verification
4.1.13. In respect of the validity of accreditation determined by a Manager, the following is proposed:
a. For onboarding in investment products launched by different Managers — the accreditation is proposed to be undertaken each time an investor is onboarded by a Manager.
b. For onboarding in investment products launched by the same Manager — the accreditation status may be given a validity period of 3 years from the date of eligibility assessment. In this regard, the Manager is proposed to be recognised at the group entity level, so that the validity of accreditation is extended to Managers of the same group entity across investment vehicles viz. AIF, SIF and PMS.
c. To account for the validity period of 3 years, the applicant shall be required to meet the eligibility criteria on the basis of income or net worth or securities market exposure, and shall furnish the following documents:
| Eligibility criterion | Document to be furnished |
|---|---|
| Income | Latest Income Tax Return. |
| Net worth | A net worth certificate from a practising Chartered Accountant, which shall not be older than 6 months. The Chartered Accountant may optionally state the actual net worth while certifying that it meets the threshold. |
| Securities market exposure | eCAS summary statement generated by depositories and/ or broker statement, which shall not be older than 6 months;
or a certificate from a practising |
4.1.14. A total of 52 entities have commented on the proposal regarding the validity of Manager led accreditation. In this regard, 46 entities have favoured the proposal, while 6 entities have disagreed with the proposal.
4.1.15. Respondents broadly supported the proposed three year validity and recognition at the Manager/ group level, noting that this is an improvement on the extant position, under which an investor chooses between a two year and a three year certificate at separate cost, and that group level recognition across AIF, SIF and PMS vehicles is a material simplification.
4.1.16. With regard to the first part above, some respondents submitted that a fresh determination at every unrelated Manager would result in duplication and undermine the objective of simplifying accreditation, and that accreditation should attach to the investor and be portable across Managers.
4.1.17. Commenters also sought a longer validity (five years or perpetual), and a definition of the expression ‘Group’ for the purposes of group entity recognition.
SEBI’s views:
4.1.18. A portable, Manager-agnostic accreditation is already available under the Accreditation Agency route, which is retained and whose validity is proposed to be aligned at three years. An investor who wishes to invest across unrelated Managers may avail the Accreditation Agency route and obtain a certificate that is usable across intermediaries and products. Manager led accreditation, by contrast, is intended to be linked to the Managers own determination and accountability, and a determination made by one unrelated Manager may not necessarily be relied upon by another Manager without undertaking appropriate verification, particularly since the latter would be responsible for its own compliance and investor onboarding.
4.1.19. A three year validity provides a reasonable balance between certainty for investors and periodic verification of continued eligibility, and represents a simplification from the existing framework while retaining an appropriate periodicity for reassessment. It may also be noted that the extant framework already provides that an investor who is accredited into a scheme remains tagged as accredited for the remaining life of that scheme, so that no revalidation is required in respect of that investment.
4.1.20. The expression ‘Group’ will be defined while specifying the modalities, and it is proposed that it will be aligned with the definition of ‘corporate group’ under Explanation Ito Regulation 19F(1) of the AIF Regulations. Adoption of an existing regulatory definition would avoid a fresh test being introduced for this purpose alone, and would provide certainty as to the entities across which the validity of a Manager led accreditation extends.
4.1.21. It is also observed that benefits of accreditation are also extended to Investment Advisors (lAs) and Research Analysts (RAs). In this regard, while an IN RA may not undertake the accreditation of a prospective investor on its own, it is proposed that where a group entity of the IN RA has undertaken such an exercise and certified an investor accordingly, the IN RA may be permitted to accept such accreditation during its validity. The same may be specified by way of a circular.
Proposal 3: Safeguards for Manager led accreditation
4.1.22. The proposal changes the existing approach under which accreditation is determined by an independent Accreditation Agency. This independence provided credibility to the assessment of an investor’s financial capacity. Allowing the Manager to determine accreditation could therefore create a potential conflict of interest.
4.1.23. Appropriate safeguards are therefore necessary. Accordingly, the following safeguards are proposed:
a. Accountability framework: Managers undertaking accreditation shall be responsible for ensuring compliance with the prescribed eligibility criteria. Incorrect accreditation arising from negligence, inadequate verification or noncompliance with prescribed procedures may attract appropriate regulatory action.
b. Maintenance of records: Managers shall be required to
maintain all records, supporting documents and verification evidence relied upon for accreditation, preserved for a minimum period specified by SEBI and made available for inspection as and when sought.
c. Audit requirements: Accreditation processes shall be subjected to periodic internal audit and compliance review. Managers shall also be required to obtain annual certification from an independent auditor regarding compliance with accreditation requirements.
d. Laid down accreditation policy: Every Manager undertaking accreditation shall be required to adopt an accreditation policy specifying (a) conflict of interest norms, so that accreditation activity is separated from business development activity and any mis-selling of accreditation status is avoided; (b) escalation and grievance redressal processes, to resolve investor concerns arising from the accreditation status of applicants; and (c) record retention infrastructure, which shall inter alia cover data privacy and cybersecurity concerns, so that the confidentiality of the data submitted by investors is protected.
4.1.24. A total of 51 entities have commented on the proposal regarding safeguards for Manager led accreditation. In this regard, 44 entities have favoured the proposal, while 7 entities have disagreed with the proposal.
4.1.25. There was broad agreement that the safeguards are the necessary counterweight to Manager led accreditation. The most widely shared reservation was that the requirement of an annual independent audit is disproportionate and duplicative, AlFs being already subject to a statutory audit and to the annual PPM audit, and the accreditation records being in any event available for inspection under the record keeping safeguard. The alternatives suggested were to subsume the review within the existing annual PPM audit, to permit it to be performed by a professional other than the statutory auditor, or to rely on internal audit and compliance review with external audit reserved for cases where specific risk indicators arise.
4.1.26. Commenters also submitted that a single certificate from a practising Chartered Accountant confirming that the applicable threshold is met be accepted in place of the underlying documents, extended also to the income criterion, so as to protect the confidentiality of the investor’s financial information.
SEBI’s views:
4.1.27. The regulatory objective is an independent check on the integrity of the accreditation process, and that objective can be met without mandating a separate audit engagement. Accordingly, the details of the audit requirement will be specified in the circular to be issued. The broad contours of the safeguards are proposed to be specified by SEBI, while the granular details may be developed by the Standard Setting Forum for AlFs.
4.1.28. The suggestion that a certificate from a practising Chartered Accountant be accepted for the income criterion may be accepted.
Proposal 4: Continuation of the Accreditation Agency route
4.1.29. The Manager led accreditation framework proposed above is intended to operate as an additional, optional route for determination of accreditation status, and not in substitution of the existing Accreditation Agency based framework.
4.1.30. This dual route structure is intended to preserve investor choice and accommodate differing investor preferences. Investors who anticipate participating in schemes of multiple, unrelated Managers, or who otherwise value the portability afforded by a Manager-agnostic accreditation valid across intermediaries and products, may continue to avail the Accreditation Agency route. Conversely, investors who prioritise the convenience of a consolidated onboarding process, or who wish to avoid concerns regarding the privacy of financial data, may avail the Manager led route.
4.1.31 A total of 51 entities have commented on the proposal regarding continuation of the Accreditation Agency route alongside the Manager led accreditation route. In this regard, 45 entities have favoured the proposal, while 6 entities have disagreed with the proposal.
4.1.32. Commenters valued the neutrality and portability of an Agency issued certificate and the option it preserves for an investor who does not wish to place financial documents before a Manager. Diverging views were expressed on either side — certain commenters submitted that the Agency route should be discontinued or phased out once the Manager led framework is operational, while others submitted that only an Accreditation Agency should be permitted to accredit, as they are independent third parties governed as subsidiaries of market infrastructure institutions.
SEBI’s views:
4.1.33. The two routes serve different purposes. The Accreditation Agency route provides an independent, Manager agnostic determination that is portable across intermediaries and products, and it is that portability which the Manager led route, by its nature, cannot supply. The manager may rely on the due diligence of the Accreditation Agency, and need not seek further documentary evidences for the purpose of accreditation.
4.1.34. Discontinuing the Accreditation Agency route would remove the only route available to an investor who does not wish to route financial information through a Manager, and would leave the framework wholly dependent on determinations made by interested parties.
4.1.35. Equally, the concern regarding independence, which underlies the suggestion that only an Accreditation Agency be permitted to accredit, has been considered above; the Agency route continues to be available and the proposal does not displace it, but adds an optional route so as to address the duplication, cost and capacity constraints recorded in the consultation paper. Both routes are accordingly proposed to be retained.
Proposal 5: Alignment of validity norms for the Accreditation Agency route
4.1.36. The validity norms of accreditation granted through the Accreditation Agency route may also be aligned with the validity norms prescribed for Manager led accreditation for own schemes, as referred above.
4.1.37. A total of 48 entities have commented on the proposal regarding alignment of the validity norms between the Accreditation Agency route and Manager led accreditation for own schemes. In this regard, 42 entities have favoured the proposal, while 6 entities have disagreed with the proposal.
4.1.38. Respondents broadly supported alignment of the validity period, noting that a common validity period would avoid differential treatment between the two accreditation routes and reduce the possibility of regulatory arbitrage. The dissenting views were that the alignment should operate in the opposite direction, the Agency route being the established mechanism; and that the Agency route should instead carry a longer validity of five or six years, given its portability, or a longer period for investors who consistently and materially exceed the thresholds.
SEBI’s views:
4.1.39. Aligning both routes at three years (based on latest financial data) achieves parity while delivering the relief sought. A differential validity would reintroduce the very arbitrage between the two routes that this proposal seeks to remove. A longer or differential validity based on the extent to which an investor exceeds the eligibility threshold would introduce additional complexity and may require collection and verification of additional information. Since the same underlying financial criteria apply, a common three year validity is considered appropriate.
5. Introduction of securities market exposure as an additional eligibility criterion
Issues under consideration
5.1. Industry has proposed that financial assets capable of independent digital verification be recognised as an additional route for accreditation. These could include listed equity securities, mutual fund units, AIF units and such other securities as may be specified. This would reduce cost and effort involved in providing detailed financial information and reduce dependence on submissions requiring manual generation, such as a CA certificate.
5.2. The proposal has merit because the value of securities market exposure can indicate not only an investors financial capacity but also the investor’s exposure to financial products and willingness to take investment risks.
5.3. However, securities holdings represent only the asset side of an investors financial position. They do not take into account the investors liabilities. Therefore, using gross securities holdings alone as a measure of eligibility, without adjustment for liabilities, carries a risk of over-inclusion.
5.4. To determine an appropriate threshold, an analysis was undertaken of securities holdings across different bands and participation in exchange traded options, with the latter being used as an indicator of risk taking behaviour. The analysis covers equity, mutual funds, ETFs, AlFs and futures open interest. As per data from stock exchanges and depositories as on April 30, 2026, the position is as under:
| Holding bracket (INR) | Individual investors (approx.) | Of which option traders (approx.) | Non- individual investors (approx.) | Of which option traders (approx.) |
|---|---|---|---|---|
| 0-1 crore | 12.50 crore | 7% | 6.06 lakh | 10% |
| >= 5 crore | 2.90 lakh | 27% | 1.20 lakh | 63% |
| >= 10 crore | 1.50 lakh | 33% | 98,000 | 66% |
| >= 20 crore | 82,000 | 40% | 82,000 | 69% |
| >= 50 crore | 42,000 | 47% | 62,000 | 71% |
5.5. The data indicates that as the value of securities holdings increases, the number of eligible investors decreases significantly, while the proportion of option traders increases. At the INR 5 crore threshold, approximately 27% of individual investors are option traders, which is around four times the proportion in the base bracket. A similar trend is seen for non-individual investors.
5.6. The threshold is therefore important because it determines both the size and the composition of the Al universe. A threshold that is too low may include a large number of investors who may not necessarily have the intended level of sophistication with an unintended consequence/ risk of retailising the product. A threshold that is too high may make the new route less useful. The objective is to identify investors who have both the financial capacity to absorb losses and the willingness to take investment risk, while creating a sufficiently large investor base to support risk capital.
Proposal 6: Recognition of securities market exposure as an additional criterion
5.7. It is proposed to introduce an additional criterion for accreditation on the basis of securities market exposure. Such exposure can be verified through a copy of the eCAS generated by depositories and/ or a broker statement, reducing the need for manual intervention through a Chartered Accountant, and relying instead on the digital infrastructure developed by depositories and stock brokers.
5.8. The existing framework requires a net worth of INR 7.5 crore with at least INR 3.75 crore in financial assets. Financial assets are broader than securities market exposure, and also include investments such as bank fixed deposits, certificates of deposit, etc. Therefore, securities market exposure represents a narrower measure of financial capacity. Accordingly, the following securities market exposures are proposed to qualify for meeting the stipulated eligibility condition:
5.8.1. Securities market exposure in demat form, viz. equity instruments, debt instruments, REITs/ InvITs, AIF units, etc.;
5.8.2. Securities market exposure through mutual fund folios;
5.8.3. Futures open interest position, reckoned at notional value as reflected in the broker statement;
5.8.4. Unlisted securities in demat form;
5.8.5. Overseas securities market investments; and
5.8.6. Investments under the National Pension System.
5.9. Based on the analysis above, it is proposed that investors may qualify as Als if they hold securities market exposure of at least INR 5 crore. For body corporates and trusts other than family trusts, it is proposed that the securities market exposure threshold may be kept at INR 20 crore. These thresholds are intended to identify investors with sufficient financial capacity and a demonstrated willingness to take investment risk.
5.10. Based on the available data as on April 30, 2026, approximately 3.7 lakh investors would meet the proposed criteria. The current number of AIF investors is around 96,000. The proposed criteria could therefore increase the potential AIF investor base, thereby facilitating greater participation in risk capital.
5.11.A total of 50 entities have commented on the proposal regarding introduction of ‘securities market exposure’ as an additional eligibility criterion. In this regard, 40 entities have favoured the proposal, while 10 entities have disagreed with the proposal.
5.12. Respondents broadly supported the introduction of this additional route, noting that securities market holdings are relatively transparent and verifiable and may serve as an objective indicator of an investor’s familiarity with financial markets and ability to bear investment risk, and that the route could reduce the need for extensive manual certification.
5.13. Dissenting commenters have submitted that the proposed thresholds are too high, with suggestions ranging from INR 3.75 crore down to INR 1 crore for individuals, and from INR 15 crore down to INR 10 crore for body corporates. A contrary view was that the threshold for individuals should be raised to INR 10 crore, and several commenters supported the thresholds as proposed.
5.14. It was also suggested that the financial thresholds be supplemented or replaced by a knowledge and experience test, such as professional qualifications, relevant employment or investment experience, investment history, or a NISM examination combined with a lower financial threshold or a cap on the amount invested. Some respondents further suggested that an investor’s own declaration regarding securities holdings, experience and risk appetite should be sufficient, particularly where the investor has substantial market experience.
5.15. Commenters further submitted that liabilities, leverage and encumbrances are not captured, and proposed an investor declaration as to borrowings raised against the securities relied upon, or the exclusion of pledged, hypothecated or margin funded holdings. Commenter have also pointed out that that the valuation basis for unlisted securities is unspecified, and that investments under the National Pension System were omitted from the list of qualifying assets. A few commenters have suggested that undeployed cash held by a portfolio manager pending deployment should qualify.
SEBI’s views:
5.16. The threshold was not set by reference to the extant financial assets sub-limit, but from the analysis of holdings brackets and participation in exchange traded options. It is material that this is an additional and optional route: an investor who does not meet it remains eligible on income or on net worth, and for a body corporate the securities market exposure threshold of INR 20 crore is lower than the extant net worth requirement of INR 50 crore. At the proposed thresholds, approximately 3.7 lakh investors would be eligible as against a current AIF investor base of about 96,000, which is a substantial widening of the eligible universe. The thresholds are accordingly proposed to be retained.
5.17. As regards a knowledge or experience based route, the extant framework was designed around objective financial criteria for the reasons recorded in the consultation paper, namely that financial capacity enables an investor to engage expert advice and to absorb loss, and that financial criteria are less susceptible to interpretational differences across market participants.
5.18. Requiring the holdings to be adjusted for borrowings or encumbrances would defeat the purpose of the criterion, the entire rationale for recognising securities market exposure being that eligibility can be established from a statement generated by the depository or the broker, without manual intervention. An investors liabilities are not capable of being established in the same manner, and ascertaining them would require a separate examination, which is the very exercise the criterion is designed to avoid.
5.19. The inclusion of investments under the National Pension System in the list of qualifying assets may be considered. Undeployed cash lying with a portfolio manager would not qualify as a securities market exposure, since the proposed criterion is intended to capture actual holdings in specified securities and market instruments.
5.20. As regards the other definitional issues, the framework specifies certification by a practising Chartered Accountant as an alternative means of establishing the threshold, which addresses assets that are not evidenced through the eCAS; further standards in this regard may be developed by the Standard Setting Forum for AIFs.
6. Deemed Accredited Investor status for Persons Resident Outside India Issues under consideration
6.1. Under the extant framework, certain categories of persons such as the Central and State Governments, developmental agencies and funds set up by them, qualified institutional buyers, Category I foreign portfolio investors, sovereign wealth funds and multilateral agencies, are deemed to be Accredited Investors and are not required to obtain a certificate of accreditation. Industry has suggested that this list may be expanded to recognise other categories of inherently sophisticated investors, such as foreign developmental financial institutions and pension funds, since requiring such institutions to obtain separate accreditation may not provide significant additional investor protection.
6.2. The categories currently accorded deemed Accredited Investor status generally have the following characteristics:
6.2.1. Each such category is a sovereign entity, a multilateral institution, or an entity subject to a pre-existing, independent regulatory or registration framework of its own — such as QIBs, who are already recognised institutional participants under the ICDR Regulations, or Category I FP1s, who are subject to registration and ongoing supervision under the FPI Regulations;
6.2.2. Such entities are typically subject to institutional governance, public accountability, disclosure or oversight mechanisms — whether governmental, multilateral or regulatory — that independently address the concerns of financial sophistication and loss-bearing capacity that accreditation otherwise seeks to verify; and
6.2.3. Such entities do not, by their institutional character, ordinarily give rise to the same information asymmetry or investor protection concerns that arise in the case of individual or first-time investors, since their investment decisions are typically governed by internal risk frameworks, mandates or statutory objects.
6.3. It is further recognised that there is a need to encourage foreign currency inflows into the domestic economy and to facilitate ease of access for foreign capital into various investment products, consistent with SEBI’s broader objective of deepening the pool of risk capital available to Indian markets.
Proposal 7: Extension of deemed accreditation to all Persons Resident Outside India
6.4. It is proposed that deemed Accredited Investor status may be extended to all Persons Resident Outside India, including all FPIs, as defined under FEMA. The relevant clauses of FEMA are placed at Annexure D.
6.5. It may be noted that, in light of this proposal, two of the representations received from stakeholders stand addressed and no separate proposal is considered necessary in respect thereof, viz. (i) expansion of eligibility criteria for foreign pooled investment vehicles on the basis of AUM; and (ii) permitting CA-equivalent international bodies to certify the net worth of foreign investors.
6.6. A total of 47 entities have commented on the proposal regarding extension of deemed accreditation to all Persons Resident Outside India. In this regard, 42 entities have favoured the proposal, while 5 entities have disagreed with the proposal.
6.7. Commenters supporting the proposal observed that requiring documentary verification of foreign income and net worth is impractical, and that the measure would encourage foreign currency inflows into Indian start-ups and alternative products.
6.8. Some respondents objected that residency, by itself, should not be treated as a proxy for sophistication. It was submitted that the categories presently accorded deemed status share three attributes identified in the consultation paper, namely sovereign, multilateral or independently regulated character, institutional governance and public accountability. Whereas, the FEMA definition covers, inter alia, an individual who has taken up employment or a vocation outside India, without reference to income, net worth or market experience. It was submitted that this could result in an asymmetry whereby a resident individual would be required to satisfy the prescribed financial thresholds while a non-resident individual would face no corresponding test, and concerns were raised regarding possible circumvention, whereby an investor who does not satisfy the domestic eligibility criteria could route an investment through a non-resident relative.
6.9. The alternatives suggested were to restrict deemed status to institutional and regulated categories of PROI, or to require an individual PROI either to satisfy the applicable Indian threshold or to provide evidence of being recognised as an accredited, professional or sophisticated investor in the home jurisdiction.
SEBI’s views:
6.10. The rationale for the proposal is the need to encourage foreign currency inflows and to facilitate ease of access for foreign capital into Indian investment products, consistent with the objective of deepening the pool of risk capital available to Indian markets.
6.11. In this regard, the deemed status to all PROIs would obviate requirement of documentary verification of foreign income and net worth, and is aimed at making the on-boarding process seamless, faster and more efficient.
6.12.An equivalence test referenced to home jurisdiction classifications would require the framework to recognise, and to keep pace with, a large number of foreign regimes, and would be cumbersome to administer.
6.13. The concern that a resident investor who does not meet the eligibility criteria could route a commitment through a non-resident relative’s account is noted. An AIF and its Manager are reporting entities under the Prevention of Money-Laundering Act, 2002, and are required, under the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 and the SEBI Master Circular on Anti-Money Laundering Standards and Combating the Financing of Terrorism, to carry out client due diligence, to identify the beneficial owner of every investor and to satisfy themselves as to the source of funds. In addition, any investment by a Person Resident Outside India into an Indian investment product is routed through the framework of the Foreign Exchange Management Act, 1999 and the reporting attendant on it. An investment made in the name of a non-resident, in which the beneficial interest in fact vests in a resident, would therefore have to be identified and dealt with by the Manager under those obligations.
7. Proposal 8: ‘Look-through’ for Limited Liability Partnerships
7.1. A few AIPAC members had suggested that a look-through’ provision may be brought in for Limited Liability Partnerships (“LLPs”), whereby if each partner is individually an accredited investor, the LLP should be granted accredited status. The rationale advanced is drawn from the analogous provision presently available for partnership firms set up under the Indian Partnership Act, 1932.
7.2. In this regard, it may be noted that an LLP, unlike a partnership firm, is a body corporate with a separate legal identity, limited liability and perpetual succession under the Limited Liability Partnership Act, 2008, and is, for most other regulatory purposes, treated on a footing closer to a company than to a partnership firm. Further, the partners of an LLP can change during its existence.
7.3. The proposal was placed for public consultation specifically to elicit views on whether such a look-through may be permitted and, if so, the safeguards to be incorporated.
7.4. A total of 46 entities have commented on the above proposal. In this regard, 41 entities have favoured the proposal, while 5 entities have disagreed with the proposal.
7.5. The safeguards proposed by the commenters supporting the look-through included clear establishment of each partner’s accredited status; undertakings from the partners that they are aware of the consequences of being treated as accredited on a look-through basis and will honour the LLP’s commitments; a declaration of ultimate beneficial ownership; annual certification of continued accreditation; and intimation to the Manager or Accreditation Agency of any change in partners, failing which the status would lapse pending re-verification. Other commenters proposed a majority test in place of an ‘all partners’ test, an outer limit on the number of partners, or that the look-through be restricted to Designated Partners.
7.6. Separately, some of the commenters have argued that an LLP should in any event be permitted to qualify at the entity level, being a body corporate under section 2(d) of the Limited Liability Partnership Act, 2008 with a separate legal identity, limited liability and perpetual succession, which would also avoid the need to reassess its status whenever its partners change.
SEBI’s views:
7.7. A large majority of the respondents supported the look-through. The AIF Regulations already recognise a look-through of this kind for a partnership firm set up under the Indian Partnership Act, 1932, where each partner independently meets the eligibility criteria. An LLP is, in commercial substance, a vehicle of the similar character i.e. a small, closely held body of partners who have come together to hold and deploy their own funds. While an LLP and a Partnership firm differ in terms of the liability on partners, the two may not be treated differently for the limited purpose of determining accreditation.
7.8. Under the proposed framework, every partner would be required to independently meet the eligibility criteria. On that test, each person who participates in the investment through the LLP is a person whom the framework independently recognises as having the financial capacity to assess and bear the risk, and no person obtains, through the vehicle, access to a product or a flexibility for which such person would not individually qualify.
7.9. The objective of the present review is to simplify accreditation and to widen the base of eligible investors. It is understood that LLPs are commonly used by investors to pool and hold investments, for reasons of operational convenience, governance and efficiency. Where the persons behind the vehicle are themselves accredited, requiring the LLP to build up income, net worth or securities market exposure in its own name, before it can be recognised as accredited, may make the accreditation framework cumbersome.
7.10. The safeguards suggested by the commenters may be adopted, and would be specified while specifying the modalities vide circular. These would include: (a) the accreditation of an LLP on the look-through basis being available only where each partner independently meets the eligibility criteria as on the date of the determination; and (b) where a partner is itself a body corporate, including another LLP, a firm or a trust, that partner independently meeting the eligibility criteria applicable to it, so that the look-through does not extend beyond one level.
7.11. The variants suggested by some commenters, namely a majority test or a look-through confined to the Designated Partners, may not be accepted. Either would permit partners who are not individually accredited to obtain, through the LLP, access to products and flexibilities for which they would not individually qualify, and would dilute the very safeguard on which the look-through rests.
7.12. In view of the above, it is proposed that a look-through’ may be permitted for a Limited Liability Partnership, on the basis that each partner independently meets the eligibility criteria for accreditation, on the lines of the provision presently available for a partnership firm. It is clarified that this is in addition to, and does not displace, the existing position that an LLP, being a body corporate, may obtain accreditation in its own right on satisfying the criteria applicable to a body corporate.
8. Proposal 9: Accreditation of a wholly owned subsidiary on the strength of the parent’s net worth
8.1. A few AIPAC members had suggested that a wholly owned subsidiary of a company may be recognised as accredited investor if the parent company holds the prescribed net worth. The rationale advanced is that a wholly owned subsidiary, being entirely owned and controlled by its parent, operates under the parent’s oversight and financial backing, and that requiring the subsidiary to independently satisfy the net worth criterion may not be relevant.
8.2. However, a company and its wholly owned subsidiary are distinct legal persons, and the parent’s liability towards the subsidiary is ordinarily limited to its investment in the subsidiary. Therefore, there are concerns as to whether the net worth of the parent translates into a corresponding loss absorption capacity at the level of the subsidiary, which is the entity making the investment and bearing the investment risk.
8.3. The proposal was placed for public consultation specifically to elicit views on whether such recognition may be permitted and, if so, the safeguards to be incorporated.
8.4. A total of 42 entities have commented on the above proposal. In this regard, 36 entities have favoured the proposal, while 6 entities have disagreed with the proposal.
8.5. The safeguards proposed by the commenters supporting the proposal included a certified copy of a shareholders’ and board resolution recording that the company is aware of the consequences of being treated as an accredited investor; confirmation by the company’s auditor of the parent’s net worth; evidence of the wholly owned status and of the ownership and control chain; periodic confirmation that the subsidiary remains wholly owned; and immediate lapse of the status on any dilution or change in control.
8.6. A number of commenters have accepted that the parent’s net worth does not establish loss absorption capacity at the level of the subsidiary, and proposed a legally enforceable parent undertaking or guarantee to bridge that gap. The commenters opposing the proposal submitted that a company and its wholly owned subsidiary are distinct legal persons, that the risk of the investment falls on the subsidiary and its own stakeholders, and that the same net worth could support the accreditation of any number of subsidiaries.
SEBI’s views:
8.7. The safeguards suggested are largely evidentiary. They establish that the parent qualifies and that the subsidiary is wholly owned, but do not address the concern identified in the consultation paper, which is not whether the parent is financially sound, but whether the financial capacity of the parent is available to the subsidiary to meet drawdowns or otherwise honour the investment commitments undertaken by the subsidiary. A company and its wholly owned subsidiary are distinct legal persons and the parent’s liability towards the subsidiary is ordinarily limited to its investment in it; a resolution and an auditor’s certificate do not, by themselves, create an obligation on the parent to fund the subsidiary’s investment commitments. Further, the same net worth could support the accreditation of any number of wholly owned subsidiaries, each of which would obtain access, on the strength of a single balance sheet, to products for which it does not itself qualify, while the risk of the investment including the obligation to meet drawdowns and other commitments would remain that of the subsidiary and its own stakeholders.
8.8. A parent undertaking or guarantee is a contractual arrangement between two private parties. Recognising it as the basis of accreditation would make an entity’s eligibility turn on the existence, terms and continued enforceability of a private contract, which the accrediting entity would have to construe and to monitor for the life of the investment, and whose enforceability would depend on its terms, on the solvency of the parent at the time it is called upon and on the willingness of the subsidiary or its stakeholders to enforce it. The eligibility criteria under the framework are tests of the financial position of the applicant itself, evidenced by objective and verifiable documents. Where a parent is willing to stand behind the investment obligations of its subsidiary, the simpler and more certain course is for it to capitalise the subsidiary to that extent, so that the subsidiary satisfies the eligibility criteria in its own right.
8.9. In view of the above, it is proposed that a wholly owned subsidiary may not be recognised as an accredited investor on the strength of the net worth of its parent. A subsidiary seeking accredited status may be assessed against the eligibility criteria applicable to a body corporate in its own right.
9. Proposal to the Board
9.1. Taking into account the recommendations of AIPAC, the public comments received on the consultation paper and internal deliberations, it is proposed that the AIF Regulations may be suitably amended to:
9.1.1. Provide that a person may be recognised as an accredited investor either by an accreditation agency or by a specified SEBI registered/ regulated entity, in the manner as may be specified by the Board from time to time.
9.1.2. Introduce “securities market exposure”, as may be specified by the Board, as an additional eligibility criterion for accreditation, at a threshold of INR 5 crore in the case of individuals, Hindu Undivided Families, family trusts and sole proprietorships, and INR 20 crore in the case of body corporates and trusts other than family trusts.
9.1.3. Include Persons Resident Outside India, as defined under FEMA, within the categories of persons deemed to be accredited investors, in place of the existing references to Category I foreign portfolio investors, and sovereign wealth funds.
9.1.4. Recognise a Limited Liability Partnership as an Accredited Investor where each partner independently meets the eligibility criteria for accreditation.
9.2. It is proposed to specify the following by way of issuance of a circular:
9.2.1. A Manager may determine and record the accredited status of an investor into an investment product. The Manager shall be recognised at the group entity level, so that the validity of accreditation extends to Managers of the same group entity across investment vehicles viz. AIF, SIF and PMS.
9.2.2. Accreditation determined by a Manager shall be undertaken each time an investor is onboarded by a different Manager, and shall have a validity of 3 years from the date of eligibility assessment in respect of investment products launched by the same Manager. The validity norms of accreditation granted through the Accreditation Agency route shall also be 3 years.
9.2.3. Safeguards for Manager led accreditation shall be specified.
9.2.4. The securities market exposure that shall qualify for meeting the stipulated eligibility condition would be specified.
9.2.5. Safeguards for accreditation to Limited Liability Partnership where each partner independently meets the eligibility criteria for accreditation.
9.2.6. IN RA may also be permitted to accept the accreditation status of an investor where a Manager in the group of the IN RA has determined and certified the accreditation investor status.
9.2.7. The documents required for verification of the eligibility thresholds shall be specified, viz. the latest Income Tax Return or a certificate from a practising Chartered Accountant for income; a net worth certificate from a practising Chartered Accountant not older than 6 months for net worth; and for securities market exposure, an eCAS summary statement generated by depositories and/ or broker statement not older than 6 months, or a certificate from a practising Chartered Accountant.
9.2.8. The expression ‘Group’, for the purpose of recognition of the Manager at group entity level, shall carry the meaning assigned to `corporate group’ under Explanation Ito Regulation 19F(1) of the AIF Regulations.
9.2.9. The Accreditation Agency based framework shall continue to remain available to investors alongside the Manager led route, and the proposals specified above shall come into force from the date of notification of the amendment in this regard.
9.3. The draft amendment to the AIF Regulations and the draft notification for the proposed amendment are placed at Annexure E and Annexure F respectively.
9.4. The Board is requested to consider and approve the proposals as in the Memorandum and authorize the Chairperson to make consequential and incidental changes and take necessary steps to give effect to the decisions of the Board.
Enclosures:
1. Annexure A (09 pages) — Accreditation framework in various global jurisdictions
2. Annexure B (01 page) — SEBI consultation paper dated August 13, 2026 on review of the Accredited Investor framework.
3. Annexure C (39 pages) — Brief summary of public comments received on the consultation paper and SEBI’s views thereon.
4. Annexure D (02 pages) — Relevant clauses of the Foreign Exchange Management Act, 1999.
5. Annexure E (01 page) — Proposed draft amendment to SEBI (Alternative Investment Funds) Regulations, 2012.
6. Annexure F (01 page) — The draft notification for the proposed amendment.
