Accredited investors :
In a recently issued consultation paper, SEBI has proposed to create a new class of accredited investors (AIs).
To register as AIs, the investors will need to meet certain net worth, financial assets or income criteria. This class of investors will have a better understanding of the risks. Therefore they can invest in customized or complex products.
To be qualified as an AI, the individuals will require a minimum annual income of Rs 2 crore. Or, net-worth of Rs 7.5 crore or more, with at least Rs 3.75 crore in financial assets to be eligible.
Alternatively, the annual income of at least Rs 1 crore and net worth must at least be Rs 5 crore, with investments in financial assets worth at least Rs 2.5 crore can also be considered.
This move is aimed at developing a market for complex financial products in India. As the situation stands, this market is at a very nascent stage.
Such AIs, once identified can be given relaxations on certain existing regulations.
For example, in case of investing in PMS, they can be exempted from the minimum requirement of Rs 50 lakhs. Or, based on their requirements, customized F&O products or alternative investment funds can be made available for them. This will also protect retail investors from getting exposed to these complex products.
Lessons from NSE's trading halt :
Taking cue from National Stock Exchange's (NSE) trading shutdown, SEBI has issued new guidelines for exchanges.
As per that, all market infrastructure institutions (MIIs)- exchanges, Depositories etc will have to submit a detailed root cause analysis to SEBI in a time-bound manner. They will be required to carry out live trading from disaster recovery sites for 2 consecutive days every six months. And, also conduct quarterly disaster recovery drills. The guideline also includes a monitoring mechanism for corrective action. And, it also provides for penalties, if required.
Trading halt at the NSE resulted in heavy losses for many intraday traders. It could have been prevented if such a mechanism was in place. Hence, SEBI's course corrective action is much needed. Hopefully, it will prevent such events from occurring in the future.
IRDAI allows insurers to pay dividend :
The Insurance Regulatory and Development Authority of India (IRDAI) has allowed the insurance companies to pay dividends. IRDAI had barred insurers from paying instructions in April 2020.
The regulator noted that the decision is taken based on reviewing the financial results of insurers. It also observed that the business of the insurers is gradually reviving. However, the pace of revival is still slower than the pre-COVID levels.
IRDAI's decision is a positive reflection on economic progress. Last year, it had put restrictions on insurers citing the uncertain economic situation.
The major motive was to let the companies preserve cash and strengthen their balance sheets. Even the RBI has put such restrictions in place for banks which remain enforced.
Lifting the restrictions means that IRDAI is satisfied with the progress in the economy as well as with the performance of insurance companies during the pandemic.