Accredited Investors in IFSC

Page 1 of 8 CIRCULAR F. No. IFSCA-IF-10PR/1/2023-Capital Markets January 25, 2024 To, All Fund Management Entities in International Financial Services Centres (IFSCs) All Distributors of Capital Market Products and Services in IFSCs Dear Sir / Madam, Sub.: Accredited Investors in IFSC The IFSCA (Fund Management) Regulations, 2022 provide for certain flexibility with respect to investors who are considered to be better aware of and have wherewithal to withstand the risks emergent from their investments. Such investors have been termed as “Accredited Investors” and are referred to in clause (c) of sub-regulation (1) of regulation 2 of IFSCA (Fund Management) Regulations, 2022. Further, the regulatory framework for Distributors of capital market products and services, specified vide Circular dated December 21, 2022 under IFSCA (Capital Market Intermediaries) Regulations, 2021, enables distribution of a wider bouquet of products and services to such Accredited Investors as compared to other investors. Comments from public and the views of the Fund Management Advisory Committee (FMAC) of International Financial Services Centres Authority (IFSCA or Authority) were sought on the (a) proposed eligibility criteria for Accredited Investors in IFSC and (b) the modalities for accrediting the investors. Based on the review of comments received during the public consultation process, the recommendations of the FMAC and in exercise of the powers conferred under Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, read with clause (c) of sub-regulation (1) of regulation 2 of the IFSCA (Fund Management) Regulations, 2022, the IFSCA hereby specifies the eligibility criteria for Accredited Investors and the modalities related thereto as under: Page 2 of 8 Eligibility Criteria 1. The eligibility criteria for Accredited Investors are as follows: a. Individuals, Sole Proprietorships, One Person Companies and any other legal form comprising of only a natural person, which meet any of the following criteria: i. Income Criteria – Annual gross income in the preceding financial year not less than USD 200,000, with a reasonable expectation of reaching similar income level in the current financial year. Explanation – For the purpose of this Circular, “financial year” shall be considered to be the financial year as per India or the home jurisdiction of the investor. ii. Net Assets Criteria - Net assets not less than USD 1 Million, out of which at least USD 500,000 worth of net assets comprise of financial assets. The Net Assets shall be based on an individual’s financial position on a date not older than 6 months. Explanation – In determining the value of an individual’s net assets, the value of the individual’s primary residence shall not be included. Further, for the purpose of this Circular, “financial assets” shall mean and include: I. investments in capital market products, as defined under Circular dated December 21, 2022 bearing F. No. 817/IFSCA/Distribution/2022-23, issued under International Financial Services Centres Authority (Capital Market Intermediaries) Regulations, 2021, II. demand and time deposits with banks and financial institutions in IFSC, India or in any foreign jurisdiction, wherein the value of these deposits shall be considered to be lower of the actual value or USD 100,000, and III. any other product, as may be specified by Authority. iii. Joint Investments Criteria - In case of joint investments by (i) parent(s) and their child(ren), or (ii) spouses, such investments may be considered to have been made by Accredited Investors if the following conditions are met: Page 3 of 8 a) Where the joint investments are made by parent(s) and their child(ren) (including stepchildren, adopted children, ex nuptial children), at least one person should independently fulfill the eligibility criteria and such person should be responsible for making investment decisions. b) Where the joint investments are made by spouses, their combined income/ net worth should meet the eligibility criteria. b. Hindu Undivided Families (HUFs) in India and similar such family structures in India and foreign jurisdictions, which are created solely for the benefit of the members of a single family, which meet the eligibility criteria specified at sub- clauses (a)(i) or a(ii) above. Explanation – “single family” shall have the same meaning as defined under IFSCA (Fund Management) Regulations, 2022 and Circulars issued thereunder from time to time. c. Partnership firms, which meet any of the following criteria: i. Partner Criteria: All the partners of the partnership firm independently meet the applicable eligibility criteria of Accredited Investors. ii. Net Worth Criteria: Net worth not less than USD 5 Million and the partner(s) responsible for making investment decisions for the partnership firm meet the applicable eligibility criteria of Accredited Investors. d. Trusts, which meet any of the following criteria: i. Beneficiary Criteria – All the beneficiaries of the trust independently meet the applicable eligibility criteria of Accredited Investors. ii. Net Worth Criteria - Net worth not less than USD 5 Million and the person(s) responsible for making investment decisions for the trust meet the applicable eligibility criteria of Accredited Investors. e. Body corporates (including Limited Liability Partnerships), which meet any of the following criteria: i. Net Worth Criteria - Net worth not less than USD 5 Million. Page 4 of 8 ii. Constituent Criteria – All the constituents of the body corporate independently meet the applicable eligibility criteria of Accredited Investors. Explanation – For the purpose of this Circular, “constituent” shall mean shareholders in case of a company, partners in case of a limited liability partnership, etc. Further, in verifying the eligibility of a body corporate under the ‘Constituent Criteria’, if either the immediate constituent (shareholder / partner) or the ultimate constituent meets the applicable eligibility criteria of Accredited Investor, such body corporate may be considered to be an Accredited Investor. f. Following entities shall be deemed to be Accredited Investors: i. Government and Government related investors of India and foreign jurisdictions, such as central banks, sovereign wealth funds or agencies including entities controlled or at least 75% directly or indirectly owned by such Government and Government related investor(s). ii. Multilateral agency, supranational agency or any international organization of similar nature; iii. University funds, Pension funds and provident funds set up in IFSC, India or foreign jurisdiction; iv. University related endowments of such universities that have been in existence for more than five years; v. Venture Capital Schemes, Restricted Schemes, Retail Schemes, Exchange Traded Funds and Investment Trusts in IFSC. Any such schemes or funds in India or foreign jurisdiction which are regulated in their jurisdiction and wherein no single investor holds more than 33% beneficial interest; vi. Family investment funds set up in IFSC and similar regulated vehicles set up in India or foreign jurisdictions; vii. A body corporate, when acting on its own account or on account of its clients who are Accredited Investors, which is licensed, authorised, recognised or registered by Authority as any of the following; or an entity, Page 5 of 8 when acting on its own account or on account of its clients who are Accredited Investors, which is permitted by a financial sector regulator of India or of a foreign jurisdiction to carry out a financial activity which corresponds to the activities permitted by Authority to the following: a) banking unit, b) broker dealer, c) clearing corporation, d) clearing member, e) credit rating agency, f) custodian, g) debenture trustee, h) depository, i) depository participant, j) finance company or finance unit, k) fund management entity, l) global regional corporate treasury center, m) insurance offices, n) investment adviser, o) investment bank, p) stock exchange, and q) any other entity, as may be specified by Authority.