The Securities and Exchange Board of India ( Sebi ) is planning to limit investors ’ exposure to shares and equity derivatives in line with their net worth, said three people with knowledge of the development. The move is aimed at preventing individuals from going overboard on equity investments, considered riskier than bonds.Sebi has sounded out stock brokers on the proposal, according to market participants. It wants investors’ assets certified by chartered accountants and brokers, who will decide the extent of their equity exposure, said one broker.The proposal is similar to the concept of accredited investors in some developed markets . An accredited investor is one who meets requirements regarding income, net worth, asset size, governance status or professional experience. The US regulator has adopted requirements for accredited investors to protect those who may be unable to sustain the economic risk of investing in unregistered securities. The proposal, if implemented, could impact a number of equity investors.Those from the agricultural or business communities may be especially affected, as actual levels of income are not always disclosed. As a result, their declared net worth or income would be much less than it actual is, said brokers.Sebi has held meetings with market participants on implementing product suitability for investors. It is learnt that brokers have asked Sebi officials to exclude HNIs from the suitability criteria. They also raised their concerns about brokers having to determine the net worth of clients. Sebi did not respond to queries.Brokers are worried about loss of business and reduced volumes in the short term if the proposal is implemented.“A sizeable number of small investors who invest through margin funding will have to wind up their positions in the stock markets as they will not be able to produce the required net worth,” said the CEO of leading brokerage.A Mumbai-based broker said investors will have to get a net worth certificate and adjust their portfolio accordingly. “Money could also move from direct equities to mutual funds and retail brokers might lose their business,” he added.Sebi has come across several instances of investors taking on exposure to equities, especially derivatives, in excess of their declared income or share portfolios. Investors can bet on Nifty or stock futures by making an initial deposit that’s a fraction of the value. Gains can be steep but so can losses if bets go wrong. “There have been great efforts from the regulator’s side in focusing on the assessment of product suitability for retail investors who may not possess depth of knowledge, experience and sophistication,” said a person working on the proposal.Globally, regulators are implementing parameters such as education as filters for investor suitability in relation to risky instruments. However, such criteria are difficult to implement in India, Sebi feels.