An accredited investor can be a business institution or an individual who is allowed to deal with securities that are not available to the general public. Also, these securities may or may not be registered with any financial regulatory authority.
However, in order to become an accredited investor, an individual or a business entity will have to fulfil the eligibility requirement set by the market regulator.
In India, the accredited investor process was introduced by the Security and Exchange Board of India (SEBI) for high net-worth individual (HNI) investors who satisfy the regulatory body’s requirements to invest in listed startups.
How to Become an Accredited Investor in India?
In order to become an accredited investor in India, the investor or business entity, who owns a demat account will be required to apply for accreditation to the depositories or the stock exchange. Once the eligibility of the investor has been determined, the investor will be granted accreditation for a period of three years by the stock exchange.
Also, the accredited investor is required to keep the stock exchange and depositories informed of any change in the financial status.
Who Can Be an Accredited Investor?
A business entity or institution who wishes to invest in listed startups is required to have a net worth of Rs.25 crore to be considered an accredited investor. Similarly, for an individual to be considered an accredited investor, a liquid net worth of at least Rs.5 crore and total annual gross of Rs. 50 lakh is to be maintained.
The requirements for accredited investors are set by the regulatory body to ensure that the investor interests are safeguarded as the risk of losing capital on unfamiliar investments are generally high. SEBI also ensures that accredited investors are financially stable enough to absorb any losses that can occur due to unregulated securities.