The Sebi board’s approval of the framework comes after the regulator issued a consultation paper on the introduction of a new class of investors known as accredited investors in February.
Sebi defines accredited investors as “a class of investors who may be considered to be well informed or well advised about investment products”.
According to the consultation paper, an investor can become an accredited investor if her annual income is at least Rs. 2 crore or net worth at least Rs 7.5 crore with at least Rs 3.75 crore in financial assets.
While Sebi did not lay out the criteria for determining an accredited investor during the board meeting, here are the salient features of the new framework proposed by the board:
- Eligibility criteria of accredited investors will be based on financial parameters and information prescribed by SEBI
- Eligible subsidiaries of depositories and specified stock exchanges, and any other specified institutions to be recognized as Accreditation Agencies.
- Accreditation Agencies will grant accreditation status and issue Accreditation Certificate to Accredited Investor
Sebi also listed out the benefits that will accrue to accredited investors in the market. The regulator said that accredited investors will have the benefit of investing in AIF products at a lower threshold than the one prescribed by its AIG regulations.
Further, an AIF for accredited investors with a minimum investment of Rs 70 crore from each investor will be able to avail relaxation on several regulations such as portfolio diversification, conditions for launch of schemes and extension of tenure of the AIF.