SEBI Proposes AIF Investor Onboarding via Manager Due Diligence

Consultation paper; Dated: 17.06.2025

The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing several changes to enhance the existing accreditation framework for Alternative Investment Funds (AIFs). The proposed changes aim to streamline the process, improve regulatory oversight, and facilitate ease of doing business.

1. Current Status of Accreditation Agencies

Under the current regime, accreditation agencies operate based on recognition granted by SEBI. These agencies are not SEBI-registered intermediaries, which limits SEBI’s ability to regulate their operations comprehensively. Additionally, the recognition granted is valid only for a period of three years, after which the agency must apply for re-recognition—posing a recurring compliance burden.

2. Need for Change in Regulatory Status

To resolve the challenges faced by accreditation agencies, SEBI has proposed that the function of accreditation be carried out by SEBI-registered intermediaries instead of merely recognized entities. This would ensure stronger oversight, increased accountability, and a more stable accreditation framework.

3. Proposal to Designate KRAs as Accreditation Agencies

SEBI has identified KYC Registration Agencies (KRAs) as a suitable category of intermediaries to undertake the accreditation responsibilities. The consultation paper suggests expanding the eligibility criteria for accreditation agencies to include all KRAs, replacing the current restriction that only permits subsidiaries of stock exchanges and depositories to serve in this capacity.

4. Onboarding Based on AIF Manager’s Due Diligence

In a significant move towards simplification, SEBI has also proposed allowing the onboarding of accredited investors based on first-level due diligence conducted by the manager of an AIF, subject to specified conditions. This would reduce duplication of effort and potentially expedite the investor onboarding process.

5. Public Feedback Invited

Stakeholders and members of the public are invited to submit their comments on the consultation paper by July 8, 2025. SEBI seeks to gather diverse perspectives before finalising the proposed amendments to the accreditation framework.

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