Accredited Investors – UPSC Prelims

  • Currently, the Indian markets have the concept of Qualified Institutional Buyers (QIBs), which include mutual funds, insurance companies or foreign portfolio investors. These investors enjoy greater market access.
  • However, an individual investor cannot obtain the QIB status. The concept of accredited investor will provide QIB-like status to individual investors.
  • Qualified Institutional Buyers: They are those institutional investors who are generally perceived to possess expertise and the financial capacities to evaluate and invest in the capital markets.
Accredited Investors:
  • Accredited investors, also called qualified investors or professional investors, are those who have an understanding of various financial products and the risks and returns associated with them.
  • They are able to make informed decisions regarding their investments and are recognised by many securities and financial market regulators globally.
  • Generally, they are allowed to trade securities that may not be registered with financial authorities.
  • They are entitled to this privileged access by satisfying requirements regarding their income, net worth, asset size, governance status or professional experience.
SEBI’s Plan:
  • SEBI has laid out eligibility criteria for both Indian and non-resident Indians and foreign entities.
  • It has allowed the validity of accreditation for a year from the day it is granted.
  • Such accreditation is to be carried out via ‘Accreditation Agencies’ which may be the market infrastructure institutions or their subsidiaries.
Anyone is eligible to become an accredited investor provided the person satisfies at least one of three conditions:
  • Investor has a net worth of ₹7.5crore, with at least half of it in financial assets.
  • Investor has an annual income greater than ₹2 crores.
  • Individual has an annual income greater than ₹1 crore and net worth greater than ₹5 crores, with at least half this amount in financial assets.
  • For trusts and body corporates, the net worth threshold is ₹50 crore.
  • The accredited investor concept may offer benefits to investors and financial product/service providers such as:
  • Flexibility in minimum investment amount.
  • Flexibility and relaxation in regulatory requirements.
  • Access to products/ services offered exclusively to accredited investors.

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