The Securities and Exchange Board of India (“SEBI”), vide consultation paper dated February 24, 2021 (“Consultation Paper”), introduced the concept of “Accredited Investors” (“AIs”) in Indian securities market and sought comments from the public. The proposal to introduce a framework for AIs was then approved by the SEBI Board on June 29, 2021 (“Board Meeting”). AIs are a class of investors who may be considered to be well informed or well advised about investment products.

Pursuant to public consultation and approval of the SEBI Board, the framework for AIs had been introduced and accordingly the SEBI (Alternative Investment Funds) Regulations, 2012, SEBI (Portfolio Managers) Regulations, 2020 and SEBI (Investment Advisers) Regulations, 2013 have been amended and notified on August 3, 2021.

In this regard, SEBI has now vide its circular dated August 26, 2021 (“Circular”) provided the modalities for implementation of the framework for AIs. As per the Circular, persons desirous of being recognized as AIs are required to approach an accreditation agency for accreditation, which shall be responsible for:

1. verification of documents submitted by applicants for accreditation;
2. timely processing of applications for accreditation and issuance of accreditation certificate;
3. maintaining data of accredited investors;
4. verification of accreditation status;
5. maintaining confidentiality of investor information at all times and;
6. any other responsibilities as may be specified by SEBI from time to time.

Furthermore, the following entities would be eligible to carry out the accreditation process:

1. Subsidiaries of recognized Stock Exchanges, provided the Stock Exchange meets the following criteria:

a) minimum 20 years presence in the Indian securities market;

b) minimum net-worth of INR 200 crores;

c) presence of nation-wide terminals;

d) having investor grievance redressal mechanisms in place, including arbitration;

e) presence of investor service centers (ISCs) in at least 20 cities and;

f) any other criteria as specified by SEBI from time to time.

2. Subsidiaries of Depositories:

Eligible subsidiaries, for recognition as an accreditation agency in terms of regulation 2(1)(aa) of the SEBI (Alternative Investment Funds) Regulations, 2012, must make an application to SEBI through the concerned stock exchange or depository within 3 weeks from the date of the Circular.

Please find a copy of the Circular here, Board Meeting here and the Consultation Paper here.

This update has been contributed by Aastha (Partner) and Vansh Aggarwal (Associate).

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