Published: 1st Mar, 2021
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
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