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SEBI Proposes Easier Route for Wealthy Investor Accreditation
The regulator's plan would let fund managers certify investors' status, widening the pool of risk capital but raising conflict-of-interest concerns. Comments due Sept. 3.
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The Securities and Exchange Board of India has proposed a revamp of its accredited investor framework that would let investment managers determine and record an investor's accredited status during onboarding, bypassing the separate agency route that is currently required.
The regulator said the shift is meant to cut paperwork and lower costs, making accreditation status the primary measure of sophistication rather than the size of a minimum commitment. The proposal is open for public comment until Sept. 3.
Under the current rules, an investor who wants accreditation must first approach an independent agency. Under the new plan, the manager of an alternative investment fund, portfolio management service or specialised investment fund could certify that investor directly during onboarding. Investors would still have the option to use the old agency route. Accreditation would be valid for three years for products run by the same manager or group.
SEBI acknowledged the potential conflict of interest. The manager, it said, is an interested party that stands to gain from the investor's commitment and the fees that follow. Shifting the responsibility from an independent agency to the manager could be seen as a dilution of independence, the regulator said in its draft paper.
"Allied concerns include the risk of inconsistent standards across Managers in the absence of a single accrediting authority, and the need for a robust framework for record-keeping, consent management and audit, with clearly-fixed consequences for erroneous or fraudulent accreditation," SEBI said.