Modalities for implementation of the framework for Accredited Investors
Summary
This circular introduces a framework for Accredited Investors (AIs) allowing flexibility in minimum investment amounts and regulatory concessions. It establishes Accreditation Agencies, primarily subsidiaries of stock exchanges and depositories, to verify investor eligibility and issue certificates. The document details specific financial criteria for individuals and entities, the accreditation procedure, validity periods, and obligations for investors and providers. The document outlines the consequences for investors withdrawing consent, including mandatory investment increases and grandfathering of existing holdings. It prohibits pooled investment products launched exclusively for Accredited Investors from allowing consent withdrawal. Annexure B details the specific documents required for accreditation applications by individuals, body corporates, and trusts.
Text
Pursuant to public consultation and approval of the SEBI Board, the framework for “Accredited Investors” (AIs) has been introduced in the securities market.
Under the aforesaid framework, AIs may avail flexibility in minimum investment amount (“Lower ticket size”) or concessions from specific regulatory requirements applicable to investment products, subject to conditions applicable for specific products/ services under the aforesaid Regulations.
Persons desirous of being reckoned as AIs shall approach an Accreditation Agency for accreditation. Accreditation Agencies shall be responsible for verification of documents, timely processing, maintaining data, verification of status, and maintaining confidentiality.
The following entities are eligible to carry out the accreditation process: Subsidiaries of recognized Stock Exchanges meeting specific criteria, and Subsidiaries of Depositories.
Eligible subsidiaries shall make an application to SEBI through the concerned Stock Exchange or Depository, for recognition as an Accreditation Agency within 3 weeks from the date of the Circular.
This Circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect the interest of investors in securities market and to promote the development of, and to regulate the securities market.
Individuals, HUFs, Family Trusts and Sole Proprietorships are eligible if: Annual Income >= INR 2 Crore; OR Net Worth >= INR 7.5 Crore (with INR 3.75 Crore in financial assets); OR Annual Income >= INR 1 Crore + Net Worth >= INR 5 Crore (with INR 2.5 Crore in financial assets).
Body Corporates with net worth greater than or equal to INR 50 Crore are eligible.
In case of accreditation of individual investors, HUFs and Sole Proprietorships, the value of the primary residence... shall not be considered for calculation of net worth.
Where the joint holders are spouses, their combined income/ net worth should meet the eligibility criteria for AI.
For accreditation, the prospective AI (“Applicant”) shall make an application to the Accreditation Agency in the manner specified by the Accreditation Agency.
Accreditation Agency shall verify that, at the time of accreditation, the Applicant is ‘fit and proper’ to participate in the securities market, including absence of any convictions or restraint orders, not being a wilful defaulter, etc.
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Source: SecMarx — Modalities for implementation of the framework for Accredited Investors. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.