Sebi Expands Accredited Investor Criteria and Approves Common Ad Code

The Securities and Exchange Board of India (Sebi) has recently announced significant updates to its regulatory framework aimed at expanding investment opportunities and streamlining advertising norms for market intermediaries. The market watchdog's latest decisions, taken during its board meeting on Thursday, include broadening the definition of accredited investors, approving a unified advertisement code for financial intermediaries, and launching a new settlement scheme addressing past enforcement issues.

One of the key changes involves widening the pool of accredited investors. Sebi now allows individuals holding securities market assets valued at Rs 5 crore or more, and body corporates with assets exceeding Rs 20 crore, to qualify as accredited investors. This is in addition to the existing eligibility criteria based on income and net worth. The revised framework also extends the Rs 5 crore securities market asset threshold to Hindu Undivided Families (HUFs), family trusts, and sole proprietorships. Similarly, the Rs 20 crore criterion applies to body corporates and other types of trusts.

Previously, accreditation was largely dependent on income and net worth, but the introduction of the securities market asset criterion is expected to significantly increase the number of eligible investors. According to Sebi, this change could potentially raise the base of accredited investors to around 400,000, compared to the current Alternative Investment Fund (AIF) investor base of approximately 100,000. This expansion opens the door for more sophisticated investors to participate in alternative investment products and funds.

In addition to broadening eligibility, Sebi has simplified the accreditation process by introducing a manager-led accreditation route. Asset management companies managing AIFs and Specialised Investment Funds (SIFs), as well as Sebi-registered portfolio managers, will be authorized to accredit investors directly. This new pathway will operate alongside the existing system where accredited agencies handle accreditation. The accreditation will be valid for three years and will be portable across AIF, SIF, and portfolio management services within the same corporate group, subject to regulatory safeguards.

The regulator also clarified that non-resident investors, including foreign portfolio investors (FPIs), will be considered accredited investors under this framework. Limited Liability Partnerships (LLPs) will qualify if all partners meet accreditation requirements.

Separately, Sebi approved a Common Advertisement Code applicable to a broad range of regulated entities such as stock brokers, mutual fund houses, investment advisers, portfolio managers, depository participants, research analysts, and online bond platform providers. The new code allows these entities to use celebrities for promoting their brand or company name, provided prior approval is obtained and certain safeguards are followed. However, endorsements of specific financial products or services by celebrities remain prohibited.

The new advertisement framework also eliminates the requirement for mandatory pre-approval of advertisements, except those featuring celebrity endorsements. Instead, entities must submit post-issuance reports within three working days. This common code replaces various entity-specific advertisement guidelines previously issued under different Sebi regulations and circulars.

In another move to boost the debt market, Sebi amended listing rules for non-convertible debt securities. Now, issuers are required to list only new issuances of such debt securities, removing the obligation to list all outstanding unlisted debt securities when entering the market for the first time. This change aims to reduce operational burdens and costs, encouraging more issuers to access the listed debt market.

Finally, Sebi approved amendments to certification regulations for securities market professionals. Changes include extending cut-off dates for age and experience exemptions and recognizing additional courses for certification eligibility. The regulations will be renamed as the Sebi (Certification of Specified Persons in the Securities Markets) Regulations, 2007.

These regulatory updates reflect Sebi’s ongoing efforts to enhance market participation, improve transparency, and facilitate capital flow within India’s financial markets. By broadening investor eligibility and streamlining advertising norms, the regulator aims to foster a more inclusive and efficient investment environment.