Boost for AIFs as SEBI allows agreements before certification, simplifies accredited investor norms

Big for AIFs, SEBI allows agreements before certification, simplifies accredited investor norms

• SEBI eases procedural norms for accredited investors in AIFs
• AIFs can sign agreements before accreditation, but funds only after certificate
• Net-worth documentation requirements for accreditation have been simplified

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Market regulator Securities and Exchange Board of India (SEBI) on Friday issued a circular and further simplified the accredited investor framework for Alternative Investment Funds (AIFs), easing procedural requirements while retaining safeguards linked to fund corpus and prudential norms.

Under the revised framework, SEBI has allowed AIF investment managers to finalise and execute contribution agreements with prospective accredited investors pending receipt of the accreditation certificate from a recognised accreditation agency, subject to conditions. It stated, “ Any commitment made by such investor shall not be included in calculation of corpus of the scheme until such investor obtains accreditation certificate from an accreditation agency. This is to maintain sanctity of several prudential norms for AIFs which are based on corpus.

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SEBI clarified that any commitment made by such investors will not be included in the scheme corpus until the accreditation certificate is issued. In addition, AIF schemes will be permitted to receive funds only after the investor obtains accreditation, in order to preserve the sanctity of corpus-linked prudential norms. Circular read, “Schemes of AIFs shall receive funds from such investors only after they obtain accreditation certificate from an accreditation agency”.

The regulator said the move is aimed at addressing operational challenges faced by AIFs due to delays in the accreditation process.

SEBI has also eased documentation requirements for accreditation based on the net-worth criteria. Earlier, applicants were required to submit a detailed break-up of net worth as an annexure to the net-worth certificate. Based on market representation, SEBI has now done away with this requirement.

Further, it has been clarified that it will be optional for a chartered accountant to specify the exact net-worth amount in the certificate, provided the certificate confirms that the investor meets the prescribed eligibility threshold.

Trustees, sponsors and managers of AIFs will be required to ensure compliance with the revised provisions as part of the Compliance Test Report prepared under the AIF Master Circular.

The accredited investor framework was introduced in August 2021 through amendments to the SEBI (AIF) Regulations, 2012, and was subsequently streamlined in December 2023.

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