SEBI Proposes New Accredited Investor Rules in India

The Securities and Exchange Board of India (SEBI) has put forth a proposal to revise the criteria for classifying individual and corporate investors as ‘accredited investors’ (AIs). This new framework aims to significantly broaden the accredited investor base across India.

Understanding the New Criteria

Under the proposed framework, specific thresholds for security market assets will determine eligibility for AI status. These changes are projected to expand the pool of accredited investors considerably.

• Individual investors would qualify with security market assets exceeding Rs 5 crore.
• Corporate entities would be eligible with security market assets above Rs 20 crore.
• The accredited investor base is projected to increase fourfold, from the current 96,000 to approximately 3.7 lakh investors.

Currently, investors must possess a minimum net worth of Rs 7.5 crore, including at least Rs 3.75 crore in financial assets, to achieve AI qualification. The AI framework is specifically designed for sophisticated investors, granting them access to markets with fewer regulatory constraints and oversight.

Eligible Assets and Benefits

The proposal outlines a comprehensive list of security market instruments that would count towards the eligibility criteria. This broad definition ensures various investment avenues are considered for accreditation.

• Dematerialized equity and debt instruments.
• Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
• Alternative Investment Fund (AIF) units and mutual funds.
• Futures open interest positions and unlisted securities in demat form.
• Overseas securities market instruments.

Accredited investors benefit from exemptions from minimum ticket size requirements across several investment products. This includes Schemes for Investment in Funds (SIF), Portfolio Management Services (PMS), and AIFs, acknowledging their higher risk-taking capacity.

Accreditation Process and Scope Expansion

SEBI also proposes streamlining the accreditation process and expanding the framework’s reach to new investor categories. This aims to integrate more sophisticated participants into the regulated investment ecosystem.

• Investment managers or asset management entities will be permitted to determine and record an investor’s accreditation status.
• This accreditation would be valid for three years and applicable across all products offered by that specific entity.
• Once identified as an AI for a scheme, that status will be maintained for the scheme’s entire duration, irrespective of changes to initial criteria.

The regulator intends to extend the AI framework to all Persons Resident Outside India (PROI), including Foreign Portfolio Investors (FPIs), aligning with FEMA regulations. Additionally, Limited Liability Partnerships (LLPs) where each partner is an AI, and wholly-owned subsidiaries (if the parent company meets the net-worth requirements) will also be included, while the existing accreditation agency framework remains in effect.

Stakeholders are invited to provide their feedback on these comprehensive proposals by September 3, 2026, shaping the future of investor classification in India’s financial markets.