The concept of 'Accredited investor' is now a reality in India. SEBI has approved the proposal to introduce a framework to bring the concept to the Indian securities market.
Accredited investors are those investors who 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.
SEBI said individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and corporates can become accredited investors. However, the regulator is yet to announce final parameters for qualifying as accredited investors.
According to a consultation paper issued in February, the regulator plans to give accredited investor tag to those investors who have annual income of at least Rs 2 crore. There were other such conditions, which you can read here.
The move opens doors for financial service providers to introduce customised investment products for sophisticated clients. Such products would get relaxation in some of the norms set by SEBI.
Among some key benefits to Accredited Investors are:
- Relaxation in minimum ticket size for such investors in AIFs and PMSs
- Can seek relaxation in investment norms if minimum investment amount in AIF is Rs.70 crore. Such a requirement is Rs.10 crore in PMS
- Can negotiate terms and conditions on fees and services from RIAs
Investors who want to qualify as accredited investors will have to get a license from accreditation agencies, which SEBI is yet to finalize. The regulator said it could allow subsidiaries of depositories and stock exchanges to become accreditation agencies.
