SEBI Proposes New Changes To Simplify Investor Accreditation

Mumbai, June 17, 2025: The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing two significant changes within the  Alternative Investment Fund (AIF) aimed at streamlining investor accreditation. These proposals are designed to enhance capital formation and simplify the ease of doing business in India’s private market investment ecosystem.

SEBI’s proposals aim to expand the role of Know Your Client Registration Agencies (KRAs) and introduce a provisional onboarding process for accredited investors based on due diligence by Alternative Investment Fund (AIF) managers. As of May 29, 2025, India had 649 accredited investors.

What are the Key Recommendations From SEBI?

1. KRAs as Accreditation Agencies

SEBI proposes to revise the eligibility criteria to permit all SEBI-registered Know Your Client Registration Agencies (KRAs) to function as accreditation agencies. Presently, this function is restricted to only two entities: CDSL Ventures Ltd (CVL) and NSDL Data Management Ltd (NDML), which are subsidiaries of stock exchanges and depositories.

This move aims to:

• Reduce the bottleneck of limited accreditation agencies.
• Leverage existing KYC infrastructure maintained by KRAs.
• Foster competitive pricing and faster service delivery for investor accreditation.

Existing Accreditation Ecosystem Snapshot

2. Provisional Onboarding by AIF Managers

To mitigate delays in investor onboarding, SEBI suggests allowing AIFs to provisionally onboard investors as accredited, based on the AIF managers’ internal due diligence, prior to formal certification. This approach strikes a balance between flexibility and regulatory discipline, backed by SEBI’s Alternative Investment Policy Advisory Committee (AIPAC).

This shift is meant to:

• Allow early execution of contribution agreements.
• Expedite investment finalisation and fund solicitations.
• Prevent operational lags tied to accreditation delays.

Provisional Accreditation Conditions

Industry Push and Working Group Input

The proposals follow industry representations urging for:

• Lower turnaround times and accreditation costs.
• Extended accreditation validity.
• Seamless verification using authentic databases.
• Delegation of accreditation reporting to fund managers or intermediaries.

While SEBI’s Working Group for Ease of Doing Business in AIFs had also recommended empowering registered intermediaries to participate in the accreditation process, SEBI has opted to retain third-party verification through KRAs to ensure consistency and compliance integrity.

Call For Public Comments

SEBI has invited public feedback on the two proposals. Comments can be submitted online until July 8, 2025.

Submit Comments on SEBI Website

About SEBI And Accreditation

SEBI introduced the Accredited Investor framework in 2021 and subsequently revised its norms in 2023. The framework grants accredited investors enhanced flexibility and access to more complex investment products, including Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS). It is deemed crucial for ensuring that only sophisticated investors participate in high-risk, high-return ventures. By broadening the accreditation network and simplifying entry protocols, SEBI aims to deepen India’s capital markets while maintaining robust investor protection.

REF: https://www.sebi.gov.in/reports-and-statistics/reports/jun-2025/consultation-paper-on-extending-certain-flexibilities-under-accreditation-framework_94631.html

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