Accredited investors :
In a recently issued consultation paper, SEBI has proposed to create a new class of accredited investors (AIs).
To register as AIs, the investors will need to meet certain net worth, financial assets or income criteria. This class of investors will have a better understanding of the risks. Therefore they can invest in customized or complex products.
To be qualified as an AI, the individuals will require a minimum annual income of Rs 2 crore. Or, net-worth of Rs 7.5 crore or more, with at least Rs 3.75 crore in financial assets to be eligible.
Alternatively, the annual income of at least Rs 1 crore and net worth must at least be Rs 5 crore, with investments in financial assets worth at least Rs 2.5 crore can also be considered.
This move is aimed at developing a market for complex financial products in India. As the situation stands, this market is at a very nascent stage.
Such AIs, once identified can be given relaxations on certain existing regulations.
For example, in case of investing in PMS, they can be exempted from the minimum requirement of Rs 50 lakhs. Or, based on their requirements, customized F&O products or alternative investment funds can be made available for them. This will also protect retail investors from getting exposed to these complex products.
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