SEBI has released a consultation paper proposing two key changes to simplify and speed up the onboarding of Accredited Investors (AIs) in the Alternative Investment Fund (AIF) ecosystem. The aim is to reduce delays, cut costs, and make the process more efficient for both investors and fund managers.

The first proposal is to allow all SEBI-registered KYC Registration Agencies (KRAs) to act as accreditation agencies. At present, only subsidiaries of stock exchanges and depositories, namely CDSL Ventures Limited and NSDL Data Management Limited, are permitted to carry out this role. Since these two entities are already KRAs, SEBI believes expanding eligibility to all five KRAs will not disrupt the system. Instead, it is expected to bring more competition, reduce duplication, and offer better service at lower cost.

The second proposal is to give AIF managers more flexibility in onboarding investors. Currently, investors must first obtain an accreditation certificate before being onboarded. This can delay contribution agreements and fundraising. SEBI now proposes allowing AIFs to provisionally onboard investors based on their own due diligence, even before the accreditation certificate is issued.

However, this will come with strict conditions. Any investment commitment made by the provisionally onboarded investor won’t be counted towards the scheme’s corpus until accreditation is confirmed. No funds can be accepted until the investor receives their certificate. In the case of close-ended AIFs, if the investor fails to get accredited before the final close, the agreement will be considered null and void.

These proposals are based on feedback from the AIF industry and SEBI’s own advisory groups. Public comments on the paper are open until July 8, 2025, through SEBI’s official consultation portal.

Source: https://www.sebi.gov.in/reports-and-statistics/reports/jun-2025/consultation-paper-on-extending-certain-flexibilities-under-accreditation-framework_94631.html