Context

Regulator Sebi sought comments on the proposal to introduce the concept of “accredited investors” in the Indian securities market.

About

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.

Eligibility criteria

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