Archive / Investment Adviser (Level 1) / Operational Aspects of Investment Management

nism-series-xa-accredited-investor-eligibility-criteria[ INVESTMENT ADVISER (LEVEL 1) ]

According to SEBI regulations, which of the following individuals satisfies the eligibility criteria to be classified as an 'Accredited Investor'?

[ A ]An individual with an annual income of Rs. 2 Crore or a net worth of Rs. 7.5 Crore with at least Rs. 3.75 Crore in financial assets[ CORRECT ]

[ B ]An individual with an annual income of Rs. 1.2 Crore and a net worth of Rs. 4 Crore

[ C ]An individual with a total net worth of Rs. 3 Crore comprising solely real estate and physical gold

[ D ]An individual with an annual gross salary of Rs. 75 Lakhs and a liquid mutual fund portfolio of Rs. 1.5 Crore

Takeaway

An individual with an annual income of ₹2 Crore or a net worth of ₹7.5 Crore (with at least ₹3.75 Crore in financial assets) satisfies SEBI's eligibility criteria to be classified as an Accredited Investor.

Derivation

SEBI created the Accredited Investor framework to let sufficiently sophisticated, high-net-worth individuals access products (certain AIF categories, relaxed investment norms) with lighter regulatory safeguards, on the premise that they can independently evaluate risk and absorb losses. The eligibility thresholds are set deliberately high and specific: either ₹2 Crore annual income alone, OR ₹7.5 Crore net worth with at least half (₹3.75 Crore) held in liquid financial assets rather than illiquid physical assets like real estate, OR a combined lower-income-plus-lower-net-worth alternative path.

Why the others fail

B — An individual with an annual income of Rs. 1.2 Crore and a net worth of Rs. 4 Crore

₹1.2 Crore income and ₹4 Crore net worth fall below all three of SEBI's prescribed accredited investor eligibility thresholds — none of the qualifying income or net-worth-plus-financial-assets.

C — An individual with a total net worth of Rs. 3 Crore comprising solely real estate and physical gold

A ₹3 Crore net worth composed solely of real estate and physical gold fails the requirement that a substantial minimum portion of net worth be held specifically in financial assets.

D — An individual with an annual gross salary of Rs. 75 Lakhs and a liquid mutual fund portfolio of Rs. 1.5 Crore

₹75 Lakh income and a ₹1.5 Crore liquid portfolio both fall well short of the minimum income (₹2 Crore) or net-worth-plus-financial-assets thresholds SEBI prescribes for accredited investor status.