Executive Summary:
This circular, issued by SEBI on August 26, 2021, outlines the modalities for implementing the Accredited Investor (AI) framework in the securities market. It details eligibility criteria, accreditation procedures, and responsibilities of Accreditation Agencies. Eligible subsidiaries of recognized Stock Exchanges and Depositories must apply to SEBI for recognition as Accreditation Agencies within 3 weeks of the circular date.
Key Points / Main Content:
* **Accredited Investor (AI) Framework:**
* AIs can avail flexibility in minimum investment amounts or concessions from specific regulatory requirements.
* Framework details are to be available on relevant websites.
* **Accreditation Agency Responsibilities:**
* Verify applicant documents.
* Process applications and issue accreditation certificates.
* Maintain AI data.
* Verify accreditation status.
* Maintain investor confidentiality.
* Fulfill other responsibilities specified by SEBI.
* **Accreditation Agency Eligibility:**
* Subsidiaries of recognized Stock Exchanges (meeting specific criteria like 20 years presence, INR 200 crore net worth, nationwide terminals, grievance redressal, Investor Service Centers in 20+ cities).
* Subsidiaries of Depositories.
* **Accreditation Procedure:**
* Applicants apply to Accreditation Agencies as specified by them.
* Agencies verify applicants' fitness and propriety.
* Agencies issue Accreditation Certificates with unique numbers, agency name, applicant PAN, and validity dates.
* **AI Eligibility Criteria:**
* **Individuals, HUFs, Family Trusts, Sole Proprietorships:**
* Annual Income INR 2 Crore; OR
* Net Worth INR 7.5 Crore (at least INR 3.75 Crore in financial assets); OR
* Annual Income INR 1 Crore AND Net Worth INR 5 Crore (at least INR 2.5 Crore in financial assets).
* **Partnership Firms:** Each partner must independently meet AI criteria.
* **Trusts (excluding family trusts):** Net worth >= INR 50 Crore.
* **Body Corporates:** Net worth >= INR 50 Crore.
* Primary residence value is not considered for net worth calculation for individuals, HUFs and Sole Proprietorships.
* Specific conditions apply for jointly held investments.
* Foreign investors eligibility determined by rupee equivalent of income/net worth.
* **Validity of Accreditation:**
* One year if eligibility criteria met for the preceding year.
* Two years if eligibility criteria met consistently for the preceding three years.
* **Availing Benefits Linked to Accreditation:**
* Investors submit Accreditation Certificate copy and undertaking to investment provider.
* Investment provider verifies accreditation status.
* Investment provider discloses regulatory concessions and applicable conditions.
* Client agreement must detail regulatory concessions, conditions, and consequences of ineligibility.
* **Withdrawal of Consent:**
* Investors can withdraw consent, subject to conditions like increasing investment to minimum stipulated amount.
* Investments already made will be grandfathered
* No withdrawal from pooled investment products exclusively for AIs with regulatory concessions.
* **Required Documents for Accreditation:**
* Self-certified copies of documents related to identity, financial information, and undertakings, as specified in Annexure B.
Impact Analysis:
* **Recognized Stock Exchanges and Depositories:**
* *Impact:* Eligible entities can establish subsidiaries to act as Accreditation Agencies, creating a new business opportunity.
* *Action Required:* Eligible subsidiaries must apply to SEBI for recognition as Accreditation Agencies within 3 weeks from August 26, 2021.
* **Alternative Investment Funds, Portfolio Managers, Investment Advisers:**
* *Impact:* Need to understand and implement the AI framework, including verifying accreditation status and providing appropriate disclosures.
* *Action Required:* Update operational procedures and client agreements to align with the AI framework.
* **Prospective Accredited Investors:**
* *Impact:* Can access investment products and services with lower ticket sizes or regulatory concessions.
* *Action Required:* Apply for accreditation through an Accreditation Agency and provide necessary documentation and undertakings.
* **Accreditation Agencies:**
* *Impact:* Responsible for verifying documents, processing applications, maintaining data, and ensuring confidentiality.
* *Action Required:* Establish necessary infrastructure and systems to fulfill responsibilities as outlined in the circular.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body for securities markets in India, responsible for protecting investor interests and regulating the securities market.
Accredited Investors (AIs): A category of investors who meet specific financial criteria and are eligible for certain flexibilities and concessions in the securities market.
SEBI Alternative Investment Funds Regulations, 2012: Regulations governing Alternative Investment Funds in India, amended to incorporate the framework for Accredited Investors.
SEBI Portfolio Managers Regulations, 2020: Regulations governing Portfolio Managers in India, amended to incorporate the framework for Accredited Investors.
SEBI Investment Advisers Regulations, 2013: Regulations governing Investment Advisers in India, amended to incorporate the framework for Accredited Investors.
Accreditation Agency: An entity responsible for verifying documents, processing applications, issuing accreditation certificates, and maintaining data of accredited investors.
Indian Partnership Act, 1932: Law governing partnership firms in India. Partnership firms set up under this act are considered for accreditation.
Investor Service Centers (ISCs): Physical locations where investors can seek assistance and information related to their investments. Accreditation Agencies should have presence of ISCs in at least 20 cities.
CIRCULAR
SEBI/HO/IMD/IMD-I/DF9/P/CIR/2021/620 August 26, 2021
To,
Recognized Stock Exchanges,
Depositories,
Alternative Investment Funds,
Portfolio Managers,
Investment Advisers
Dear Sir/ Madam,
Sub: Modalities for implementation of the framework for Accredited Investors
A. General
1. Pursuant to public consultation and approval of the SEBI Board, the framework for
“Accredited Investors” (AIs) has been introduced in the securities market. In this regard,
the SEBI (Alternative Investment Funds) Regulations, 2012 (link), SEBI (Portfolio
Managers) Regulations, 2020 (link) and SEBI (Investment Advisers) Regulations, 2013
(link) have been amended and notified on August 03, 2021.
2. Under the aforesaid framework, AIs may avail flexibility in minimum investment amount
(“Lower ticket size”) or concessions from specific regulatory requirements applicable to
investment products, subject to conditions applicable for specific products/ services
under the aforesaid Regulations. The modalities of accreditation are provided in
Annexure A.
3. The framework for AIs may be made available on the respective websites.
B. Accreditation Agency
4. Persons desirous of being reckoned as AIs shall approach an Accreditation Agency for
accreditation. Accreditation Agencies shall be responsible for:
(a) verification of documents submitted by applicants for accreditation,
(b) timely processing of applications for accreditation and issuance of accreditation
certificate,
(c) maintaining data of accredited investors,
(d) verification of accreditation status,
Page 1 of 2(e) maintaining confidentiality of investor information at all times, and
(f) any other responsibilities as may be specified by SEBI from time to time.
5. Accreditation Agencies shall have the requisite infrastructure including systems and
manpower to fulfill their responsibilities as specified under Para 4.
6. The following entities are eligible to carry out the accreditation process:
(i) Subsidiaries of recognized Stock Exchanges, provided the Stock Exchange meets
the following criteria:
(a) minimum 20 years presence in Indian securities market,
(b) minimum networth 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.
(ii) Subsidiaries of Depositories
7. Eligible subsidiaries shall make an application to SEBI through the concerned Stock
Exchange or Depository, for recognition as an Accreditation Agency in terms of
Regulation 2(1)(aa) of the SEBI (Alternative Investment Funds) Regulations, 2012, within
3 weeks from the date of the Circular.
8. This Circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992, to protect the interest of investors in
securities market and to promote the development of, and to regulate the securities
market.
9. This Circular is available on SEBI website at www.sebi.gov.in under the categories “Legal
Framework - Circulars”, "Info for - Alternative Investment Funds”, "Info for – Portfolio
Managers” and “Info for- Investment Advisers”.
Yours faithfully,
Deepti Agrawal
General Manager
Tel no.: +91-22-26449616
deeptiv@sebi.gov.in
Page 2 of 2Annexure A – Modalities of Accreditation
1. Eligibility Criteria for Accredited Investors
1.1. The following persons shall be eligible to be considered as Accredited Investors:
(i) Individuals, HUFs, Family Trusts and Sole Proprietorships, which meet the
criteria as under:
a. Annual Income >= INR 2 Crore; OR
b. Net Worth >= INR 7.5 Crore, out of which at least INR 3.75 Crore is in the
form of financial assets; OR
c. Annual Income >= INR 1 Crore+ Net Worth >= INR 5 Crore, out of which at
least INR 2.5 Crore is in the form of financial assets;
(ii) Partnership Firms set up under the Indian Partnership Act, 1932 in which each
partner independently meets the criteria for accreditation.
(iii) Trusts (other than family trusts) with net worth greater than or equal to INR 50
Crore.
(iv) Body Corporates with net worth greater than or equal to INR 50 Crore.
1.2. For the purpose of accreditation, eligibility criteria shall be reckoned based on the
documents as specified in Annexure B.
1.3. In case of accreditation of individual investors, HUFs and Sole Proprietorships, the
value of the primary residence of the individual, Karta of HUF and the Sole Proprietor
respectively, shall not be considered for calculation of net worth.
1.4. In case of investments held jointly by more than one individual, the following
conditions shall apply for eligibility as AI:
(i) Where the joint holders are parent(s) & child(ren), at least one person should
independently fulfill the eligibility criteria for AI.
(ii) Where the joint holders are spouses, their combined income/ net worth
should meet the eligibility criteria for AI.
1.5. For the purpose of reckoning eligibility criteria, net worth of Body Corporates shall be
calculated as under:
Net worth = (Capital + free reserves) – (Accumulated losses + deferred expenditure not
written off)
Page 1 of 41.6. For the purpose of reckoning eligibility criteria, net worth of Trusts shall be calculated
as under:
Net worth = (Book value of all assets, other than intangible assets) – (Book value of
total liabilities)
1.7. For Body Corporates and Trusts, eligibility criteria for accreditation shall be considered
on the basis of the following:
(a) Financial information as per statutory audit; or
(b) Financial information as per audit by the statutory auditor as on a date during
the financial year in which application is made (if furnished).
1.8. The eligibility of foreign investors to be accredited shall be determined on the basis of
the rupee equivalent of their income and/ or net worth as applicable.
2. Procedure for Accreditation
2.1.For accreditation, the prospective AI (“Applicant”) shall make an application to the
Accreditation Agency in the manner specified by the Accreditation Agency. Detailed
documentation required for accreditation is provided at Annexure B.
2.2.Accreditation Agency shall verify that, at the time of accreditation, the Applicant is ‘fit
and proper’ to participate in the securities market, including absence of any
convictions or restraint orders, not being a wilful defaulter, etc.
2.3.The Accreditation Agency shall issue a certificate to the Applicant as an AI
(“Accreditation Certificate”). Each Accreditation Certificate shall have a unique
accreditation number, name of the Accreditation Agency, PAN of the Applicant and
validity of accreditation (start date and end date).
3. Validity of Accreditation
3.1.If the Applicant meets the eligibility criteria as under Paragraph 1 for accreditation for
preceding one year, the accreditation shall be valid for a period of one year from the
date of such accreditation.
Page 2 of 43.2.If the Applicant consistently meets the said eligibility criteria for accreditation in each
of the preceding three years, the accreditation shall be valid for a period of two years
from the date of such accreditation.
4. Procedure to avail benefits linked to accreditation
4.1.Prospective investors shall, inter-alia, submit a copy of the Accreditation Certificate
and an undertaking to the investment provider (i.e. provider of securities market
product or service) to the effect that:
(a) The prospective investor wishes to avail benefits under the AI framework.
(“Consent”).
(b) The prospective investor has the ability to bear the financial risks associated
with the investment.
(c) The prospective investor has the necessary knowledge and means to
understand the features of the Investment Product, including the risks
associated with the investment.
(d) The prospective investor is aware that the investment product is meant for AIs
and may not be subject to the same regulatory oversight as over investment
products meant for investors other than AI.
4.2.The Investment provider shall independently verify the status of accreditation of the
prospective investor from the concerned Accreditation Agency. Further, investment
providers may obtain additional undertakings from prospective investors, provided
they do not dilute or contravene the undertakings in terms of Para 4.1 above.
4.3.Prior to entering into a client agreement with an AI, the investment provider shall
disclose to the AI, details of regulatory concessions available for the proposed
investment, and the relevant conditions applicable under the AI framework.
4.4.The client agreement shall, inter-alia, provide the following:
(i) details of regulatory concessions agreed upon between the investor and the
investment provider, and the conditions for availing the same, and
(ii) consequences, if any, in the event of the investor becoming ineligible to be an
AI during the tenure of the said agreement.
5. Flexibility to investors to withdraw ‘Consent’
5.1.Investors shall have the flexibility to withdraw their ‘Consent’ and discontinue availing
benefits of accreditation, subject to the following:
Page 3 of 4(a) An investor who withdraws ‘Consent’ after availing the benefit of lower ticket size
shall be required to increase the investment to the minimum amount that is
stipulated under the applicable regulatory framework for the particular
investment product, within the timeframe specified in the client agreement.
(b) If an investor who has availed concessions to the regulatory framework
withdraws the ‘Consent’ furnished to the investment provider before the expiry
of the client agreement, the investments already made shall be ‘grandfathered’
i.e. such investments shall continue to be reckoned as investments by an AI. With
effect from the date of withdrawal of consent, any further transaction shall be in
accordance with the applicable regulatory framework.
5.2.Investors in pooled investment products which are launched exclusively for AIs, in
which concessions to regulatory framework have been availed, shall not have the
flexibility to withdraw their Consent.
5.3.The client agreement shall, inter-alia, provide the modalities for withdrawal of
‘Consent’ and consequences of the investor withdrawing the ‘Consent’.
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Page 4 of 4Annexure B - List of Documents to be submitted by Applicant for accreditation
The Applicant shall furnish self-certified copies of the following documents:
Information Documents to be submitted
In case of Individual / HUF
Proof of Identity (a) Copy of PAN Card.
(b) Copy of Aadhaar Card or Copy of Valid Passport.
Proof of financial (a) Copies of Income Tax Return(s) of preceding one or three
information financial years, depending on desired validity of
accreditation
(Number of years for (b) Certificate from practicing chartered accountant stating
which financial net worth as on March 31 of one or three financial years
information is provided preceding the date of application
shall determine the (c) Certificate from practicing chartered accountant stating
validity of the net worth as on the date of application. (optional)
accreditation)
(Calculation of Net worth to be given as an Annexure to the
certificate.)
Proof of basis of (a) Proof of ‘ready reckoner rate’ applicable to real estate
valuation of assets assets considered for calculation of net worth.
(b) Copy of demat account statement
(as applicable) (c) Any other document as required.
Undertakings Declaration from Applicant that:
(a) The Applicant is not a wilful defaulter.
(b) The Applicant is not a fugitive economic offender.
(c) The Applicant is not debarred from the securities market
as on the date of application.
(d) In case of a Non Resident Indian or foreign investor,
confirmation that he or she has not been restricted from
accessing securities market by the country of jurisdiction
where he or she resides.
(e) The submissions made to the Accreditation Agency are
true and correct and if found incorrect, the Accreditation
Agency reserves the right to reject the application or
withdraw the accreditation, as applicable.
Other Documents Any other document as specified by the Accreditation Agency
Page 1 of 3Information Documents to be submitted
In case of Body Corporates
Authorization to seek (a) Certified copy of Board Resolution to apply for
accreditation accreditation
Proof of Identity (a) Copy of PAN card
(b) Document of Incorporation
Proof of financial (a) Copies of Income tax return(s) of one or three financial
information years preceding the date of application.
(b) Copies of audited Financial Statements of one or three
(Number of years for financial years preceding the date of application.
which financial (c) Certificate from practicing chartered accountant stating
information is provided net worth as on March 31 of one or three financial years
shall determine the preceding the date of application.
validity of the
accreditation) (Working of Net worth to be given as Annexure to the
certificate)
(d) Audited financial statements prepared by the statutory
auditor for the current date/ period (optional)
(e) Certificate from practicing chartered accountant stating
net worth as on the date of application. (optional)
Undertakings Declaration that:
(To be provided by (a) The Applicant or its promoters/partners or directors are
Managing Director/ not wilful defaulters.
Designated Partner/ (b) The promoters/partners or directors of the Applicant are
authorized person) not fugitive economic offenders.
(c) The Applicant is not debarred from the securities market
as on the date of application.
(d) In case of a foreign investor, confirmation that it has not
been restricted from accessing securities market by the
country of jurisdiction where it is incorporated.
(e) The submissions made to the Accreditation Agency are
true and correct and if found incorrect, the Accreditation
Agency reserves the right to reject the application or
withdraw the accreditation, as applicable.
Other Documents Any other document as specified by the Accreditation Agency
In case of Trusts
Proof of Identity (a) Copy of PAN Card.
(b) Copy of registered Trust Deed.
Page 2 of 3Information Documents to be submitted
Proof of financial (a) Copies of Income tax return(s) of one or three financial
information years, preceding the date of application
(b) Copies of audited Financial Statements of one or three
(Number of years for financial years preceding the date of application.
which financial (c) Certificate from practicing chartered accountant stating
information is provided net worth as on March 31 of one or three financial years
shall determine the preceding the date of application.
validity of the
accreditation) (Working of Net worth to be given as Annexure to the
certificate)
(d) Audited financial statements prepared by the statutory
auditor for the current date/ period (optional)
(e) Certificate from practicing chartered accountant stating
net worth as on the date of application. (optional)
Proof of basis of (a) Statement of assets and liabilities of the Trust for
valuation of assets preceding one year or three years, depending on desired
validity of accreditation
(b) Proof of ‘ready reckoner rate’ applicable to real estate
assets considered for calculation of net worth.
(c) Copy of demat account statement
(d) Any other document as required.
Undertakings (a) The Applicant /its beneficiaries/ Trustee(s) are not wilful
defaulters.
(To be provided by (b) The beneficiaries of the Applicant or its Trustee(s) are not
Trustee/ Board of fugitive economic offenders.
Trustees) (c) The Applicant is not debarred from the securities market
as on the date of application.
(d) In case of a foreign investor, confirmation that it has not
been restricted from accessing securities market by the
country of jurisdiction where it is incorporated.
(e) The submissions made to the Accreditation Agency are
true and correct and if found incorrect, the Accreditation
Agency reserves the right to reject the application or
withdraw the accreditation, as applicable.
Other Documents Any other document as specified by the Accreditation Agency
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