Sebi's latest reform can reshape investor portfolio

REITs' equity status, easier compliance for RIAs & accredited-only AIFs: Why Sebi's latest reforms could be game-changer for investors

Sep 15, 2025

Synopsis
Sebi's recent board meeting brought significant changes for Indian investors. Registered Investment Advisors (RIAs) will benefit from eased compliance and the ability to showcase their track record through a new verification agency. Accredited investors gain access to exclusive AIF schemes with relaxed regulations, while REITs are reclassified as equity to boost mutual fund participation and market growth.

Sebi latest reformsET OnlineAccredited investors will now get the exclusivity and compliance-light regulatory framework that the tag promised. Sebi has approved a separate category of alternate investment fund (AIF) scheme that would only admit accredited investors.

The Securities and Exchange Board of India (Sebi), India’s capital market regulator, took a host of decisions at its quarterly board meeting on 12 September. While the 15-point agenda covered everything from foreign investor frameworks to stock exchange governance, three proposals stand out as notable developments for individual investors and savers. Unlike the majority of Sebi’s decisions that focus on market infrastructure and institutional processes, these three regulatory shifts directly impact what you can invest in, how you can access financial advice, and the returns you might earn on your investments. ET Wealth breaks down what these changes mean for your portfolio, your access to financial advice, and your real estate investment options.

Boost for RIAs

With just around 950 registered investment advisers (RIAs) in India and a little less than 500 being active, Sebi has taken some measures to make their lives easier. RIAs have often complained that while high entry barriers have prevented new advisers from entering the profession, a high burden of compliance has made it difficult for existing ones, even compelling some of them to surrender their licences. Sebi has taken some decisions to ease the compliance requirements of RIAs.

Mutual funds display their past performance, helping investors decide where to put their money. Until now, RIAs couldn’t do this as it wasn’t allowed. Sebi has now paved the way for RIAs to showcase their track record. It has approved the creation of a Past Risk and Return Verification Agency (PaRRVA). While its framework is yet to be announced, RIAs will eventually have to submit their performance data to this agency in a prescribed format. For now, Sebi has allowed RIAs to disclose their past performance directly to their investors in a format that will be specified shortly. Two years after PaRRVA becomes operational, an adviser’s performance record can only be based on data submitted to it post its establishment. While the interim performance disclosure allowed by Sebi is to be shown on a one-to-one basis to prospective clients or existing ones, the PaRRVA, once operational, would be a public platform.

“There are many advisers who provide equity advisory services. Investors, or their clients, would naturally ask about the adviser’s past performance if the adviser is going to recommend or suggest equity investments. Therefore, this ruling is important,” says Kavitha Menon, a Sebi Registered Investment Adviser and an Aria (Association of Registered Investment Advisers) Board member. This ruling may not have relevance for all RIAs. Harsh Roongta, Founder of FeeOnly Investment Advisers LLP, says that it’s futile for fullfledged investment advisers to demonstrate past performance because different investors have different risk profiles and therefore different portfolios. “Past performance of my retired client will not be relevant to someone in his 30s,” says Roongta.

It is standard for investors to have multiple distributors (including online investment platforms) and one investment adviser. In such cases, it’s common for clients to seek the adviser’s opinion on the assets that their distributor wouldn’t be managing. Now, Sebi has said that advisers can charge fees (up to 2.5% of the asset value per annum) to clients for advice given on such assets. “This is an excellent move, as many times clients come with portfolios, sometimes big, and that’s in a mess. A lot of an adviser’s time would go into evaluating such assets before s/he can recommend what to do with them,” says Menon.

Sebi has also now allowed graduates from any stream to register as investment advisers. Earlier, a graduate in only financialrelated fields like accountancy, finance, commerce, business management, economics, banking, insurance, capital markets, etc, was allowed to register as an investment adviser. In fact, before December 2024, the last time education rules were relaxed, only postgraduates in finance and related areas were allowed to register as investment advisors. Further, before December 2024, a minimum of five years of work experience in related areas was also mandatory.

Accredited investors

Accredited investors will now get the exclusivity and compliance-light regulatory framework that the tag promised. Sebi has approved a separate category of alternate investment fund (AIF) scheme that would only admit accredited investors. This marks the initial steps as AIFs transition from the traditional minimum commitment threshold (currently at Rs.1 crore per investor) towards using only accreditation status for investor eligibility. “The current reliance on a minimum commitment threshold as a proxy for investor sophistication may be inadequate. In contrast, accreditation status offers a more robust and reliable measure of an investor’s ability to understand and bear investment risks,” Sebi acknowledged in its release.

During this transition, existing AIFs may continue onboarding investors based on existing minimum investment threshold, while enabling AIFs to separately launch schemes exclusive to accredited investors.

Sebi has further allowed several relaxations to accredited investor-only schemes. These will be granted differential rights, exempted from the requirement that all investors’ rights be pari-passu, or equal. However, this exemption becomes applicable provided every investor gives explicit waiver. These AIF schemes will be permitted to extend tenure up to five years (compared to existing two years), subject to approval by two-thirds of investors by value in the fund. The new norms have also abolished investor cap for such schemes, fixed at a minimum of 1,000 investors for regular AIF schemes.

These relaxations will be extended to large value funds (LVFs) which are AI-only schemes as per definition. Previously offered with a minimum investment threshold of Rs.70 crore, these will now be available for Rs.25 crore. Sebi has also made provision for existing AIF schemes to opt-in as AI-only or LVF schemes and avail the associated benefits, provided all investors of existing schemes meet the minimum threshold amount specified for accredited investors, and provide their consent in this regard.

“The new notifications open doors for accredited investors to stand ahead of other investors in AIFs. Every AIF has few big winners where there is a chance to take larger exposure. This will allow AI to double down on such ideas. Opportunities will arise in areas like Pre IPO or High Yield investments to enhance returns,” said Shobhit Mathur, Co-founder, Ionic Wealth.

REITs and InvITs

To facilitate enhanced participation of mutual funds and specialised investment funds, Sebi has reclassified Real Estate Investment Trusts (REITs) as “equity”, while retaining the “hybrid” classification for Infrastructure Investment Trusts (InvITs).

Sebi felt that REITs were more inclined towards equity and relatively more liquid. InvITs, on the other hand, being products primarily privately placed with more stable cash flows and having lesser liquidity, the hybrid classification was proposed to be retained. With the re-classification of REITs, investment by mutual funds would now be considered within the investment allocation limit for equity instruments and also make them eligible for inclusion in equity indices. The existing investment limit applicable for both REITs and InvITs would now be exclusively available for InvITs.

So far, a mutual fund scheme could invest up to 10% of its net asset value (NAV) in units of REITs and InvITs, which would now be exclusively available for InvITs, thereby facilitating growth in this segment as well.

According to experts, the potential of REITs to provide a differentiated risk-return profile or risk adjusted returns to investors was not getting captured till now.

“By virtue of changing the classification to equity, equity fund managers can start to focus on this asset class in a big way,” said Shariq Merchant, Investment Director, WhiteOak Capital AMC. As per Merchant, in terms of benefits for investors, REITs will now be in a position to raise more funds, so a lot more capital formation will happen. As the sector grows, more securities will get listed and the current REITs will start to get bigger. “If invested appropriately, the riskadjusted returns can be much better for an investor who has a risk profile that is not suitable for equity or has a risk profile greater than debt,” said Merchant.

Since the first listing in 2019, the Indian REIT market has expanded steadily, reaching a market capitalisation of around US $18 billion as of August 2025. With three more REITs expected over the next four years, India is projected to cross US $25 billion in market capitalisation by 2030, said the latest Anarock-Credai report.

[The Economic Times]