Accreditation Of Investors In Startups: Will It Work?
25 March 2019 8:08 AM IST
SEBI?s approach towards investor accreditation is both over-inclusive and under-inclusive, writes Umakanth Varottil.
- regulators around the world bear the task of investor protection and impose considerable duties on issuer companies to make elaborate disclosures and comply with strict procedures while raising capital.
- However, leading jurisdictions around the world permit issuers to raise capital from specific types of investors, who are treated as accredited investors based on their wealth or sophistication, by following a much less onerous process.
- In order to receive recognition as an accredited investor, an individual or body corporate must make an application to the stock exchanges or depositories in a manner that SEBI is to prescribe.
- The stock exchanges or depositories must grant recognition based on an investor’s application.
- A careful balance between the advancement of the startup ecosystem on the one hand and investor protection and investor transparency, on the other hand, must dictate the design of accreditation.
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