Who are accredited investors? How SEBI defines them

SEBI defines accredited investors as “a class of investors who may be considered to be well informed or well advised about investment products”. The SEBI’s board after much deliberation over the proposal for introducing accredited investors into the financial markets has approved the same.

According to an Economic Times report, anyone is eligible to become an accredited investor provided their annual income stands at Rs 2 crore or their net worth pegged at Rs 7.5 crore and financial assets should be at least 3.75 crore.

SEBI, in its framework, has stated, "Accreditation Agencies" like subsidiaries of depositories and specified stock exchanges, and/or any other specified institutions can offer this title for one to become an accredited investor.

According to the market regulator, accredited investors will have the flexibility to participate in investment products with an investment amount lesser than the minimum amount mandated in the Alternative Investment Funds (AIF) Regulations and Portfolio Managers (PMS) Regulations.

The Alternative Investment Funds for accredited investors where each investor invests minimum investment amount of Rs 70 crore may avail relaxation from regulatory requirements such as portfolio diversification norms, conditions for launch of schemes and extension of tenure of the AIF.

SEBI in its approved framework proposal has said accredited investors with a minimum investment of Rs 10 crore with a registered PMS provider can get relaxation from the regulatory requirement in respect to investments in unlisted securities. They can also enter into bilaterally negotiated agreements with the PMS provider.

Also, accredited investors who are clients of investment advisers will have the flexibility to determine the limits and modes of fee payable to the investment adviser through bilaterally negotiated contractual terms.

Accredited investors may offer benefits to the investors and financial product or service providers. Their offerings can have flexibility in minimum investment amount, flexibility and relaxation in regulatory requirements, and access to products/services that are only offered to accredited investors.