SEBI's consultation paper on accredited investors has ten proposals. Every one is about who qualifies and how they prove it, none about what accreditation is actually worth once you have it. The repairs are sensible and deserve support. But accreditation didn't fail because the gate was in the wrong place; it failed because there was little on the other side worth the walk. And the relaxations that have arrived, NISM waiver, investor-cap exclusion, side letters, no PPM template, are reliefs for the manager, not rights for the investor. While this piece was written before yesterday's board meeting, which implemented the consultation paper recommendation, the arguments have solidified from recommendation to SEBI decision. My column in @FinancialXpress:
SEBI has fixed the plumbing of accreditation and left the more important question unasked. Its consultation paper of 13 August 2026 carries ten proposals on the accredited investor framework. Every one of them is about who qualifies and how they prove it. Not one is about what accreditation is worth once you have it.
The diagnosis in the paper is correct, and the repairs are sensible. Accreditation arrived in 2021 and has barely been used. SEBI records 3,820 accredited investors as on 31 July 2026, against an AIF investor base of roughly one lakh. Anyone who has taken a client through the process knows why. Two accreditation agencies operate. The cost is real, the validity is short, and few wealthy families enjoy handing their financial statements to a third party for the privilege of renewing next year.
So the paper proposes a securities market assets route, Rs. 5 crore for individuals and Rs. 20 crore for body corporates, verifiable from a depository statement rather than a chartered accountant’s certificate. It proposes to let the manager of the investment product determine accreditation at onboarding, valid for three years across the manager’s group, with the agency route surviving alongside for investors who want portability. It extends deemed accreditation to all persons resident outside India. By SEBI’s own estimate the securities assets route alone could make about four lakh investors eligible. These proposals should be supported.
But notice what the ten share. They all widen the gate. None of them touches what lies beyond it. The framework did not fail because the gate was in the wrong place. It failed because for most of its life there was very little on the other side worth the walk.
That has begun to change, and the direction of the change is instructive. SEBI created a separate class of accredited investors only funds through the Third Amendment to the AIF Regulations, notified on 18 November 2025, and cut the minimum ticket for a large value fund from Rs. 70 crore to Rs. 25 crore by its circular of 8 December 2025. Now read the relaxations. The NISM certification requirement for the manager’s key investment team falls away. Accredited investors are excluded from the count for the 1,000 investor cap. Pari passu rights can be waived and side letters written. The scheme can run five extra years instead of two. In a large value fund, the standard placement memorandum template and its annual audit go as well. Every one of those is a relief for the manager. Not one is a right the investor did not have the day before he was accredited.
The numbers make the point. There were 649 accredited investors in July 2025 and 3,820 in July 2026, a near sixfold rise in the year the accredited investors only fund arrived. Investors accredit themselves when accreditation buys something. They do not want the certificate. They want the product on the other side of it.
SEBI has said more than once that its long term vision is to move from the minimum commitment threshold to accreditation status as the primary measure of sophistication, and that the two metrics will co-exist for now to avoid disruption. That was the position in August 2025. It is still the position in August 2026. “For now” is carrying a great deal of weight in a sentence that has not changed in a year. A paper devoted to overhauling accreditation was the natural place to say when the transition happens. It does not.
The paper does ask, in terms, whether securities market assets are an appropriate criterion for sophistication. They are a better proxy than net worth and still only a proxy. All three routes measure wealth. A retired promoter sitting on Rs. 5 crore of a single scrip qualifies; a derivatives trader with Rs. 50 lakh and fifteen years of scars does not. Every jurisdiction that started with a wealth test has been pushed to supplement it. The US Securities and Exchange Commission added holders of the Series 7, 65 and 82 licences, and knowledgeable employees of private funds, to its definition in August 2020. India is refining its wealth test at the moment others are looking past one.
On manager led accreditation, the objection is obvious. It places the certification of sophistication in the hands of the person who earns a fee on the onboarding. SEBI’s proposed safeguards, an accreditation policy at manager level, record maintenance and independent verification, are the right instinct. They need a sanction behind them. Sample audit of manager accreditations by the accreditation agencies, with consequences in registration terms for a pattern of wrongly certified investors, would supply one.
The proposals deserve support. They are the right repairs to a process that plainly needed them. But SEBI has answered the question it set itself and avoided the one that matters. A gate is worth only as much as the room behind it, and that room is at present furnished for the manager. Until the minimum commitment threshold goes, accreditation will remain a certificate in search of a purpose.
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