Bombay Stock Exchange (BSE) has now got the powers to give accreditation to investors, sources told BusinessLine . Market regulator SEBI came up with the concept of accredited investors to promote a new class of investors based on higher net worth and earnings, just like the foreign portfolio investors and domestic institutions, accredited investors will be another class and can expect relaxation in regulations to be followed.
Accredited investors will have the flexibility to participate in investment products with an amount lesser than the minimum requirement mandated in the Alternative Investment Fund (AIF) norms and Portfolio Management Services (PMS) rules. Also, they will be required to follow lesser financial criteria for trading risky assets.
SEBI said that, "large value accredited investors" can enter into an agreement with the portfolio manager for a minimum investment amount of ₹10 crore. Portfolio managers can invest 100 per cent funds of accredited investors into unlisted companies.
BSE published the criteria for becoming accredited investors on its website and has started the enrollment process, sources said. A person or entity will be identified as an accredited investor on the basis of net worth or income. Individuals, Hindu Undivided Family (HUFs), family trusts, sole proprietorships, partnership firms, trusts and body corporates can get accreditation based on financial parameters specified by SEBI.
An individual, HUF, family trust or sole proprietorship, can be an accredited investor if their annual income is at least ₹2 crore or net worth is at least ₹7.50 crore, with at least half of it in financial assets. Such entities with a combination of at least ₹1 crore annual income and a net worth of ₹5 crore, and half in financial assets can also become an accredited investor.
For trusts other than family trusts, minimum net worth of ₹50 crore would be required to qualify as accredited investors. While for corporates, a net worth of ₹50 crore will be mandatory. In case of a partnership firm, each partner independently will have to meet the eligibility criteria for accreditation.
The regulator said that central as well state governments, funds set up by them, developmental agencies, qualified institutional buyers, Category I FPIs, sovereign wealth funds and multilateral agencies will be accredited investors and will not be required to obtain a certificate of accreditation.
AIF for accredited investors, where each investor invests a minimum amount of ₹70 crore, can get relaxation from regulatory requirements.