SEBI Working Group Proposes Investor Exam for Accredited Status Beyond Just Net Worth
A working group under the Securities and Exchange Board of India (SEBI), formed to simplify the business environment for Alternative Investment Funds (AIFs), has proposed the introduction of a qualification exam for individuals seeking accredited investor status, in addition to current financial benchmarks, according to industry sources.
The panel believes that relying only on monetary benchmarks such as annual income and net worth does not necessarily confirm whether an individual has sufficient knowledge of investments or the risk-bearing capacity required for sophisticated financial instruments.
To address this, the working group suggested implementing a more comprehensive evaluation system that incorporates an individual’s professional background and familiarity with private market investments. This recommendation stems from the understanding that complex investment decisions demand more than just financial capacity—they require experience and informed judgment.
As per industry insiders, the group has emphasized assessing skill sets and suggested a qualitative test for determining eligibility. Professionals holding specific financial credentials or with over three years of experience in handling risk-oriented investment products could qualify. Employees of investment firms with five or more years of industry experience may also be considered eligible.
Despite this, some voices within the industry argue that passing an exam may not truly reflect an individual’s ability to handle risk. They note that SEBI already requires a declaration from investors acknowledging their awareness of risks involved when registering as accredited investors.
A contrasting view was shared by an advisor specializing in AIFs and PMS investments. The advisor noted that while investors seem content when returns are favorable, blame often shifts to the regulator during market downturns. As per one industry source, SEBI has not yet finalized any policy decision on the exam recommendation and will likely release a consultation paper for public feedback before taking further steps. A query sent to SEBI on this matter remained unanswered.
Risk Acknowledgement by Accredited Investors
At present, individuals seeking to become accredited investors must meet financial criteria based on income and net worth. During onboarding, they must submit a self-declaration confirming their understanding of the investment products and the risks they carry. They are also required to acknowledge in writing their ability to bear financial risk and to affirm that investments made under this category may not be governed by the same level of regulatory oversight as retail investments.
Current Financial Eligibility Criteria
Entities eligible for accredited investor status include individuals, Hindu Undivided Families (HUFs), family trusts, and sole proprietorships. They must satisfy either of the following financial thresholds:
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Annual income exceeding ₹2 crore, or
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Net worth of over ₹7.5 crore, with at least ₹3.75 crore in financial assets,
Alternatively:
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Annual income of ₹1 crore or more, with a net worth exceeding ₹5 crore, of which at least ₹2.5 crore must be in financial assets.
Note: The value of the primary residence is excluded from net worth calculations.
SEBI’s Push Toward an Accredited Investor Regime
SEBI is promoting a shift toward an accredited investor framework, aiming to allow more flexibility and potentially lighter regulation for AIFs. The industry has been urging the regulator to streamline the registration process to widen participation. Presently, India has only around 200 registered accredited investors.
Benefits for Accredited Investors
Accredited investors gain access to investment avenues not typically available to retail participants. These include private placements, alternative investment funds, hedge funds, venture capital, and portfolio management services (PMS). The minimum investment requirement is ₹1 crore for AIFs and ₹50 lakh for PMS for accredited investors—lower than the general norms for retail investors.
This proposal is part of SEBI’s broader initiative to improve the ease of doing business across its regulated sectors. The working group includes members from the AIF sector, legal and investment professionals, and former regulatory officials.
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