SEBI proposes AIF schemes exclusively for accredited investors

Mumbai, Aug 9 (IANS) The Securities and Exchange Board of India (SEBI) has proposed a distinct alternative investment fund (AIF) scheme that would admit only "accredited investors".  

Such specialised AIF schemes can benefit from "a lighter-touch regulatory framework than a regular AIF," a release from SEBI said.

Accredited investors are persons or businesses who meet SEBI-certified wealth, net worth and income criteria. For sole proprietorships, HUFs, and Family Trusts, a minimum annual income of Rs 2 crore or at least Rs 7.5 crore net worth, with Rs 3.75 crore in financial assets, qualifies them for accredited investor status.

A SEBI-recognised agency, like a stock exchange or depository subsidiary (CDSL Ventures Limited), grants accreditation based on these criteria, financial assets, and investment experience.

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. Stakeholders can send comments on these proposals until August 29.

According to the proposal, during the transition, both metrics would coexist, enabling AIFs to launch special schemes open exclusively to accredited investors.

SEBI informed that several relaxations to “accredited investor” only schemes are under consideration. "AI-only schemes may be exempted from the requirement of maintaining pari-passu rights among investors, subject to a waiver provided by each investor to this effect," the regulator said.

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 be provided a “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.

"In case of an accredited investors-only fund, the responsibilities and obligations cast on the trustee of an Alternative Investment Fund in terms of provisions of these regulations shall be carried out solely by the manager of the Alternative Investment Fund," the markets regulator said.

While the current count of accredited investors is modest, SEBI expects growth due to recent regulatory changes. Sebi is also considering several proposals to increase the number of accreditation agencies, foster more competition, and further simplify the process of accreditation.