Context:
Markets regulator Sebi is looking to expand the definition of qualified institutional buyers (QIB) and remove the 200-investor cap, allowing angel funds to access a broader pool of accredited investors.
What is Qualified Institutional Buyers (QIB)?
Key Highlights:
- Qualified Institutional Buyers (QIB) will now include a wider range of accredited investors.
- The present cap of 200 investors may be removed keeping angel funds open to a broader pool of investors.
- To deepen the debt securities market and boost startup funding.
- There is still concern about issues like investor verification, onboarding financially poor investors, and conflict with the provisions of the Companies Act, 2013.
Why It Is Important?
- This means more money for startups
- The broader the definition of QIB, the more likely it is to make venture capital and angel investing liquid. Startups will have more sources of funding.
- A much stronger debt market will be
- The inclusion of other institutions under the QIB definition would certainly strengthen India’s corporate bond market as it would allow a larger number of investors to get attracted towards debt securities.
- Regulatory Conundrums
- It would be necessary for SEBI to put in rigorous checks on investor eligibility to ensure that financially poor individuals are not allowed into high risk investments.
It is expected that before implementation of such changes SEBI would first issue a consultation paper where it would adopt a more balanced strategy between protecting the investors and expanding the market.
