Sebi moots lighter regulatory framework for AIFs with accredited investors

Capital markets regulator Sebi has proposed a separate category of Alternative Investment Fund (AIF) schemes, consisting of accredited investors, which will enjoy a lighter-touch regulatory framework compared to regular AIFs.

In a consultation paper issued on Friday, Sebi suggested that such accredited investors (AI-only schemes) could be allowed certain flexibilities, given that accredited investors are deemed to have the knowledge, financial capacity and risk appetite to make informed investment decisions without the same level of regulatory safeguards required for retail participants.

The proposal includes exemptions from requirements such as maintaining pari-passu rights among investors, NISM certification for key investment team members, and the current limit of 1,000 investors per scheme, the regulator said.

These schemes could also extend their tenure by up to five years, subject to investor approval, and in the case of trust-structured AIFs, managers could take over certain responsibilities currently mandated for trustees, it added.

The regulator also said the move is in line with its long-term vision of gradually shifting from the present 'minimum commitment threshold' metric to 'accreditation status' as the primary criterion for determining investor sophistication in AIFs.

However, both metrics would co-exist for now to avoid disruption in the industry, it added.

Sebi noted that while the number of accredited investors remains modest, recent relaxations and proposed process improvements, including leveraging KYC registration agencies and streamlining accreditation norms are expected to boost participation.

The Securities and Exchange Board of India (Sebi) has invited public comments on the proposals till August 29.