The International Financial Services Centres Authority (IFSCA) has recently introduced the IFSCA (Fund Management) Regulations, 2022, which brings a significant development in the financial landscape. One noteworthy aspect of these regulations is the recognition and facilitation of “Accredited Investors.” These investors, considered to be well-informed and resilient to investment risks, are granted certain privileges under the regulatory framework.
Eligibility Criteria for Accredited Investors:
The IFSCA has outlined clear eligibility criteria for Accredited Investors, encompassing a diverse range of entities. Individuals, Hindu Undivided Families (HUFs), partnership firms, trusts, and body corporates, including Limited Liability Partnerships, can qualify based on criteria such as income, net assets, and joint investments. The criteria ensure that only financially sophisticated entities or individuals can benefit from the Accredited Investor status.
Notably, the income criteria stipulate an annual gross income of not less than USD 200,000, with an expectation of maintaining a similar income level in the current financial year. Net assets, excluding the value of primary residences, should be not less than USD 1 million, with at least USD 500,000 comprising financial assets. The regulations also recognize joint investments, provided specific conditions are met.
Deemed Accredited Investors:
The regulations identify certain entities that are automatically deemed Accredited Investors. This includes government and government-related investors, multilateral agencies, university funds, pension funds, and various regulated schemes and trusts. The inclusion of these entities showcases the flexibility and trust extended to organizations with proven financial credibility.
Responsibilities of Regulated Entities:
Regulated entities, intending to accept investors as Accredited Investors, are mandated to adhere to strict procedures. These entities must establish internal policies for verifying and reviewing investor eligibility periodically. The verification process involves relying on certificates provided by recognized professional bodies, ensuring accurate assessment of financial parameters.
Importantly, regulated entities must maintain records of verification and review for a minimum of six years, ensuring compliance with confidentiality norms and applicable laws. The periodic review aligns with Customer Due Diligence procedures, emphasizing the ongoing commitment to ensuring investor eligibility.
Withdrawal of Consent:
While the Accredited Investor status brings certain advantages, the regulations recognize the voluntary nature of this classification. Investors have the right to withdraw their consent at any time, and regulated entities must facilitate a smooth and time-bound process for such withdrawals. Transactions entered into before the withdrawal remain unaffected, reflecting a balanced approach that respects the investor’s autonomy.
