The accredited investor regime launched by the Securities and Exchange Board of India in August 2021 has failed to get off the ground, with just over 200 investors accredited so far, according to people familiar with the matter. Industry watchers see cumbersome documentation and opaque rules as fundamental constraints, and Sebi may soon revisit existing processes.

Accredited investors are considered capable of trading relatively risky investment products due to their financial strength and ability to absorb possible financial losses. As a result, they have the flexibility to participate in AIF and PMS for a lower amount than the current norm stipulates.

For an AIF, this could mean an investment of less than Rs 1 crore. In addition, alternative investment funds for accredited investors (with a minimum investment of Rs 70 crore per investor) may be less regulated.

Individuals or entities are identified as accredited investors based on net worth or income.

These agencies currently have their own documentation requirements. In the case of an individual, an asset or income test is required. In the case of a corporate entity, a certificate from a chartered accountant will do the trick, experts said.

“Today, if someone has a $7 billion fund with $2 billion in commitments, the nod for accreditation should be a no-brainer. But the application got stuck for seven months,” an industry official explained. “Foreign investors, offshore funds or sovereign wealth funds may not be able to meet the requirements. Newly formed entities that may not have a year’s worth of bank records or any income but have sufficient assets may not be eligible.”

Individuals, HUFs, family trusts and sole proprietorships with an annual income of Rs 2 crore or a net worth of Rs 7.5 crore with at least Rs 3.75 crore in the form of financial assets or a yearly income of Rs 1 crore plus at least Rs 5 crore net worth of at least Rs. 2.5 crore in financial assets to qualify as an accredited investor. Additional eligibility criteria exist for partnerships, bodies, and corporate and foreign investors.