As per a leading business daily report, the market watchdog Securities and Exchange Board of India (Sebi) is considering a proposal to limit investors' exposure to equity and equity related instruments such as derivatives based on their net worth.
The report said the proposal being mulled upon by the SEBI has already been informed to stockbrokers. And the move aims to put a check on individual investors who tend to go overboard when taking positions in equity investments which are considered riskier than bonds.
The policy though new in India is already in place in several of the markets across the globe. The move shows similarity to the concept of accredited investors in some of the developed nations. An accredited investor is the one who complies with the requirements concerning income, net worth, asset size, governance status or professional experience. In the US, the concept of accredited investors is well in place to protect investors who cannot afford the economic risk of investing in unregistered securities.
The daily further said that SEBI wants assets of investors to be certified by brokers and chartered accountants (CAs) who will then decide on an individual's equity exposure limit.
The report added if put in place, the new policy will affect a large chunk of equityinvestors. As per brokers, business and agricultural communities will be worst hit as in most of the cases the real or actual income is not always disclosed.