SEBI moots introduction of ‘accredited investor’ concept
1st Mar, 2021
Regulator Sebi sought comments on the proposal to introduce the concept of “accredited investors” in the Indian securities market.
Who are ‘accredited investors’?
- Accredited investors, also called qualified investors or professional investors, are those who have an understanding of various financial products and the risks and returns associated with them.
- They are able to take informed decisions regarding their investments.
- They are recognized by many securities and financial market regulators around the globe.
While proposing a framework for accredited investors, Sebi laid out eligibility criteria for both Indian and non-resident Indians and foreign entities.
- For Indian individuals, Hindu Undivided Families (HUFs) and Family Trusts, Sebi proposed an annual income of over or equal to Rs 2 crore or net worth over or equal to Rs 7.5 crore with not less than Rs 3.75 crore of financial assets.
- Alternatively, such entities with an annual income above or over Rs 1 crore besides net worth higher or equal than Rs 5 crore with not less than Rs 2.5 crore of financial assets may also be eligible.
- For trusts and body corporates, proposed asset under management (AUM) and net worth, respectively, is equal to higher than Rs 50 crore.
- For NRI and foreign individuals and family trusts, Sebi proposed an annual income of over or equal to USD 3 lakh or net worth over or equal to USD 1 million with not less than USD 5 lakh of financial assets.
- Besides, multilateral agencies, sovereign wealth funds, international financial institutions and Category-I foreign portfolio investors may also be eligible. The regulator said the accreditation once granted shall be valid for one year from the date of accreditation.
Significance of the concept
- The accredited investor concept may offer benefits to investors and financial product/service providers, such as:
- flexibility in minimum investment amount
- flexibility and relaxation in regulatory requirements
- access to products/ services offered exclusively to accredited investors