SEBI Issues Consultation Paper to Overhaul Accredited Investor Framework

The Securities and Exchange Board of India (SEBI) issued a comprehensive consultation paper seeking public comments on reviewing the Accredited Investor (AI) framework. The capital markets regulator aims to streamline registration procedures, relax eligibility norms, and expand the investment scope for accredited investors in Alternative Investment Funds (AIFs) and portfolio management services (PMS).

SEBI introduced the Accredited Investor framework in 2021 to create a distinct category of sophisticated investors—individuals, HUFs, family trusts, and corporate entities—possessing higher financial capacity and risk comprehension. AIs are granted regulatory flexibility and exemptions from standard protectionist norms applicable to retail investors in financial markets.

Currently, an individual qualifies as an AI if their annual income exceeds ₹2 crore, or net worth exceeds ₹7.5 crore with at least half in financial assets. The consultation paper proposes simplifying verification through accredited agency accreditation, lowering entry thresholds, and allowing AIs to participate in flexibility-driven regulatory sandboxes and structured financial products.

Modernizing the AI framework boosts domestic capital formation, enhances private equity flows, and aligns Indian financial markets with global standards like the US SEC regulations. Exam candidates should review SEBI regulatory functions, financial market instruments, and capital accumulation concepts for Economics sections in Prelims and Bank/Regulatory exams.