The Securities Exchange Board of India’s (SEBI) introduction of the concept of “accredited investors” is a boost to the Alternative Investment Funds (AIF) industry, investors said.
On Tuesday, SEBI introduced a framework for accredited investors "who may be considered well informed or well advised about investment products”. The markets regulator relaxed certain requirements for this class of investors.
Typically, investors need to put in at least Rs 1 crore in an AIF but SEBI has said that this would not apply to accredited investors.
Furthermore, the AIFs with accredited investors where each investor has put in over Rs 70 crore can avail relaxation around “portfolio diversification norms, conditions for launch of scheme, and extension of tenure of AIF”, SEBI said.
In a series of amendments introduced last quarter, SEBI had also overhauled AIF disclosure norms for AIFs making compliance more extensive.
“SEBI’s decision to introduce the framework for accredited investors is a monumental step that will hugely benefit the alternative investments community,” Ashley Menezes, partner and COO, ChrysCapital, and co-head, regulatory affairs committee, Indian Venture Capital and Private Equity Association (IVCA), said.
“The global concept of sophisticated investors, who are well informed and advised about investment products, and therefore should be afforded flexibility in making and managing their investments, will significantly boost participation in AIFs and PMS products,” he added.
“Over time this framework would be a powerful tool to distinguish sophisticated investors who have the capability to independently evaluate and manage risk without extensive regulatory prescriptions, making Indian regulations more aligned with capital market regulations in more mature markets,” said Subramaniam Krishnan, partner, private equity and financial services, tax and regulatory services, EY.
“This will open up several investment structuring options for investors as well as the fund management community,” Tejesh Chitlangi, senior partner, IC Universal Legal Advocates & Solicitors, said.
“This will enhance the attractiveness of Indian AIFs to both domestic and foreign investors,” Siddharth Pai, founding partner and CFO at 3one4 Capital, co-chair at regulatory affairs committee, IVCA, said.
“This has been a key ask of the Indian AIF industry as well in order to enhance the pool of domestic rupee capital and to allow for greater flexibility and liberalisation of the frameworks governing sophisticated investors,” Pai said.