Indian wealthy investors can now become accredited investors to get access to dedicated financial products with no minimum ticket size in AIFs and PMSs and negotiate terms and conditions on fees and services from AMCs and RIAs.
In final regulations on accredited investors, SEBI has allowed investors having annual income or Rs.2 crore or net worth of Rs.7.50 crore including Rs.3.75 crore in financial assets to become accredited investors.
In addition, an investor with annual income of more than Rs 1 crore and net worth of at least Rs 5 crore (including a minimum of Rs 2.5 crore financial assets) is also eligible to become accredited investor.
Accredited investors are those investors who are assumed to 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.
In case of partnership firms, each partner will have to meet the criteria. Trusts and body corporates with over Rs 50 crore assets are also eligible for the tag.
Investors who fulfil the criteria will have to approach 'Accreditation Agencies' for accreditation. The agency will issue the certificate after verification.
The accreditation will be valid for one year. After getting accredited for three continuous years, investors will get the option to apply for 2-year licence.
Flexibility to withdraw
Accredited investors will have the flexibility to stop availing the benefits of accreditation at any given time. If they choose to do so, they will have to meet the investment conditions set for normal investors. For example, if an investor availed the benefit of lower ticket size, he/she will have to increase the investment to the minimum amount.
Who can become an accreditation agency?
Subsidiaries of stock exchanges and depositories, which have minimum 20 years of presence in Indian securities market can carry out the accreditation process. Subsidiaries of stock exchanges will also have to meet the following criteria:
1. Minimum net worth of Rs 200 crore
2. Presence in nation-wide terminals
3. Should have investor grievance redressal mechanism in place along with investor service centers in at least 20 cities
