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Securities and Exchange Board of India (SEBI) Accredited Investor Update

VerifyInvestor.com

Last March we published an article regarding the implementation of an accredited investor category in India. Specifically, SEBI, or Securities and Exchange Board of India, was considering the addition of the accredited investor to their regulations. At that time, SEBI gathered public comments to better understand the needs of Indian individuals and entities. Now, several months later SEBI has announced the details for their version of the accredited investor. Not only did SEBI announce the requirements for accredited investor status, but they also explained what is required to verify accredited investors. This exciting new addition to the Indian economy should open up brand-new investment opportunities for investors throughout the country.

The basic requirements of accredited investor status according to SEBI are outlined below:

●     The following entities shall be eligible to be considered as Accredited Investors:

  • Individuals, HUFs, Family Trusts, and sole proprietorships, which meet the criteria as under:

-     Annual Income greater than or equal to INR 2 Crore; OR

-     Net Worth greater than or equal to INR 7.5 Crore, out of which at least INR 3.75 Crore is in the form of financial assets; OR

-     Annual Income greater than or equal to INR 1 Crore AND Net Worth greater than or equal to INR 5 Crore, out of which at least INR 2.5 Crore is in the form of financial assets;

  • Partnership Firms set up under the Indian Partnership Act, 1932 in which each partner independently meets the Accredited Investor criteria for individuals.

  • Trusts (other than family trusts) Assets under Management greater than or equal to INR 50 Crore.

  • Body Corporates with a net worth greater than or equal to INR 50 Crore.

●     Joint Accounts held by individuals to be considered as Accredited Investor accounts, if:

  • They are parents and children and one individual qualifies independently.; OR

  • The Joint holders are spouses, and their combined income/ net worth meets eligibility criteria.

●     Many financial institutions and entities are also considered accredited investors - the list is extensive - find out more here in section 4.2

●     Foreign investors must still meet the income/net worth requirements based on the Indian rupee.

These requirements are very similar to the United States Securities and Exchange Commission’s Rule 506(c) accredited investor requirements. However, the key differences such as dollar amounts must be paid close attention to by investors who might become both US accredited investors and Indian accredited investors. In any case, issuers who operate funds in both the US and Indian should have no problem finding accredited investors to raise cash.

SEBI will implement certain agencies that can verify accredited investors for funds, each agency will need to seek approval from the relevant stock exchange or depository institution. Verified investing will bring more opportunities to raise capital for projects throughout the private sector in India, which already has one of the fastest-growing economies in the world.

Adding another nation to the list of countries with accredited investor definitions demonstrates the growing need for private equity and a way to protect both issuers and investors. For more news on private equity, regulations, and exemptions - follow the VerifyInvestor.com blog.

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