SEBI has issued a consultation paper to introduce the concept of accredited investors in India.
Accredited investors have a better understanding of risks and returns associated with financial products. These investors have a higher financial capacity and a greater ability to absorb loss. They can request manufacturers like asset management companies to customize their offerings based on their specific needs.
With this, the market regulator aims to provide a relaxed regulatory framework for sophisticated investors and introduce products designed to meet investor-specific risk profile.
Among some key benefits of becoming accredited investors are:
- Access to customized products
- No barriers on entry such as minimum investment size (For instance, these investors can invest less than Rs.50 lakh in PMS and Rs.1 crore in AIFs)
- Enter into an arrangement with product manufacturers with specific terms and conditions
Benefits for AMCs
- Reduced compliance costs
- Less marketing cost
- Flexibility in designing products
- Ease of launching innovative products
Criteria to become accredited investors
Individuals, HUFs and family trusts can become accredited investors if they fulfil any of these three criteria
- Annual income of at least Rs 2 crore
- Networth of at least Rs.7.50 crore with minimum of Rs.3.75 crore of financial assets
- Annual income of at least 1 crore and networth of at least Rs.5 crore with at least Rs.2.50 crore in financial assets
The validity of accredited investor is proposed to be 1 year.
In addition, it is believed that investors will have to apply with SEBI to become accredited investors.
You can submit your feedback to SEBI at aiconsultation@sebi.gov.in by March 18, 2021.
