Introduction of Accredited Investor

The Securities and Exchange Board of India (SEBI) has introduced the concept of “accredited investor” to the Indian securities markets. Accredited investors will not be subject to minimum investment thresholds for Alternative Investment Fund (AIF; minimum investment one crore rupees) and Portfolio Management Services (PMS; minimum investment fifty lakh rupees) investments.;

In the AIF regulations, SEBI has defined Accredited Investor [individual] as someone who has:

i)              annual income of at least two crore rupees; or

ii)             net worth of at least seven crore fifty lakh rupees, out of which not less than three crores seventy-five lakh rupees is in the form of financial assets; or

iii)           annual income of at least one crore rupees and minimum net worth of five crore rupees, out of which not less than two crore fifty lakh rupees is in the form of financial assets.

SEBI will allow “accreditation agencies” to certify a person as an Accredited Investor based on the criteria given above. This certification will be required to qualify for exemptions from some investment restrictions.

While additional details are yet to be put in place, and the thresholds in India seem to be much higher in relation to national average incomes and net worths than, for example, in the United States, this appears to be a step in the right direction to provide larger, and presumably more sophisticated, investors a greater set of product options in the capital markets.