SEBI has given eligible investment managers a new role in checking whether clients qualify as accredited investors. Its November 5 circular introduces an optional manager-led route, with rules for evidence, validity and the reuse of a decision within the same corporate group.
The circular takes effect immediately. It puts operating details around amendments notified on October 15, rather than opening another consultation. For fund businesses, the change can reduce onboarding handoffs while placing more responsibility inside the manager’s organisation.
The Breakdown
The new route covers managers of alternative investment funds, asset management companies offering specialised investment funds, and portfolio managers. They may determine an investor’s status when the investor joins or during a scheme’s life, after verifying the relevant eligibility criteria.
Income and net-worth tests remain available. A securities-market-exposure route sets a minimum of ₹5 crore for an individual, Hindu Undivided Family, family trust or sole proprietorship. The corresponding threshold for a body corporate or another type of trust is ₹20 crore.
The exposure measure includes securities held in demat form, mutual funds held through folios, overseas securities investments and National Pension System investments. The valuation uses a depository’s consolidated statement where available. For unlisted or overseas securities not valued in that statement, a practising chartered accountant must certify the value.
A manager must tell the investor in writing when accreditation began and how long it lasts. The existing accreditation-agency route remains available. A valid agency certificate must be accepted without a fresh determination during its validity.
Why This Matters
Accreditation can now sit closer to the team onboarding an investor. That could remove a separate administrative step for someone who uses the manager-led route. The circular does not set a processing deadline or promise lower fees.
Portability has a defined boundary. A manager’s determination lasts three years and is recognised by managers in the same group across alternative funds, specialised investment funds and portfolio management services. Moving to a manager outside that group requires a fresh determination under this route.
Agency certificates are also valid for three years, while certificates issued before the circular retain their existing unexpired validity. There is a separate rule for an investor already accredited when joining a scheme: that investor continues to count as accredited for the remaining life of that scheme.
The Big Picture
Bringing the check inside an investment business creates a reason to keep it separate from selling. SEBI requires managers to separate accreditation from business development and distribution, provide an escalation and grievance process, and protect the records they collect.
The decision must be documented well enough for independent review. Internal audit and compliance review are required, and evidence must be retained for the prescribed period, including at least five years after the investor ceases to invest in the manager’s schemes where that is later.
Investment advisers and research analysts cannot independently award accredited status. They may rely on a valid determination by a manager in their own group.
The circular also deems persons resident outside India, as defined under foreign-exchange law, to be accredited investors without a separate certificate or manager-led accreditation. Managers must record the basis for that classification. Client due diligence, beneficial-owner identification and applicable source-of-funds checks remain obligations for alternative funds and their managers.
The Crunch
The practical change is a shorter possible route to an eligibility decision, supported by a clearer record of who checked it. Investors need to distinguish a manager’s group-level determination from an agency certificate. Managers taking on the work need to keep accreditation separate from business development and distribution.
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