SEBI approves framework for accredited investors in Indian securities market

Market regulator Securities and Exchange Board of India (SEBI) has approved the proposal to introduce a framework for accredited investors in the Indian securities market. Recognising this to be a "a class of investors who may be considered to be well informed or well advised about investment products", the market watchdog chalked out the salient features and benefits of this framework during its board meeting on Tuesday.

The definition of accredited investors tends to vary from country to country. This category of investors usually features high-net worth individuals or entities that have access to complex and high-risk investments.

The new framework will define the eligibility criteria for accredited investors, who may be individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body corporates, based on financial parameters and information as may be specified by SEBI.

Eligible subsidiaries of depositories and specified stock exchanges, and other specified institutions will be recognised as accreditation agencies. These agencies will grant accreditation status and issue Accreditation Certificate to accredited investors.

The framework will also set the modalities of accreditation and procedure to avail benefits linked to accreditation. Accredited investors usually enjoy special status under financial regulation laws.

As per the proposed framework, accredited investors shall have 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.

AIF for accredited investors, where each investor has a minimum investment of ₹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 stated.

Accredited investors with minimum investment of ₹10 crore with registered PMS provider, may avail relaxation from regulatory requirement with respect to investment in unlisted securities and can enter into bilaterally negotiated agreements with the PMS provider, the regulator further added.

"Accredited investors who are clients of investment advisers will have the flexibility to determine the limits and modes of fees payable to the same through bilaterally negotiated contractual terms," SEBI further mentioned.