Sebi proposes new lighter-touch approach for accredited investors for AIFs

Business Standard

14 hours ago

The Securities and Exchange Board of India (Sebi) has proposed a separate type of alternative investment fund (AIF) scheme that would admit only "accredited investors". Such AIF schemes will get the benefit of a lighter regulatory framework.
Sebi's latest consultation paper has proposed a gradual transition from the traditional minimum commitment threshold (currently at Rs 1 crore per investor) to using only accreditation status as the metric for investor sophistication in AIFs.
During the transition, both metrics would coexist, enabling AIFs to launch special schemes, open exclusively to accredited investors, who are deemed better to assess risk and conduct due diligence, the regulator has proposed.
Other benefits include extended tenure, where the scheme tenure may be extended up to five years, subject to approval by two-thirds of investors by value in the fund.
Also, such schemes will get 'certification waiver', where key investment team members may be exempt from holding a mandated NISM certification, given investors' ability to conduct independent due diligence.
Further, there will be no investor cap for such schemes, allowing them to bypass the existing limit of 1,000 investors per scheme.
Also, in trust structures, managerial duty may assume those responsibilities typically assigned to trustees, subject to contractual terms.
These relaxations mirror those already available to so-called 'large value funds'
AIFs target sophisticated investors with higher risk appetites. Sebi had introduced the 'accredited investor' framework in 2021, allowing investors meeting strict income and net worth criteria to invest with greater flexibility.
While the current count of accredited investors is modest, Sebi expects growth due to recent regulatory changes and further simplification of the accreditation process.
The regulator believes that the proposed framework will help the AIF industry pivot towards an accredited investors-only segment.