Collective Investment Scheme .
Collective Investment Scheme .
Collective Investment Scheme .
Sub-Section 2
Any scheme or arrangement made or offered by any person under which, —
(i) the contributions, or payments made by the investors, by whatever name called, are pooled and
utilized for the purposes of the scheme or arrangement;
(ii) the contributions or payments are made to such scheme or arrangement by the investors with a view
to receive profits, income, produce or property, whether movable or immovable, from such scheme
or arrangement;
(iii) the property, contribution or investment forming part of scheme or arrangement, whether
identifiable or not, is managed on behalf of the investors;
(iv) the investors do not have day-to-day control over the management and operation of the scheme or
arrangement.
The following shall not be Collective Investment Scheme (CIS):
i. Made or offered by a co-operative society registered under the co- operative societies act,
1912
ii. Under which deposits are accepted by non-banking financial companies
iii. Being a contract of insurance to which the insurance act, 1938, applies;
iv. Pension scheme
v. Under which deposits are accepted under section 74 of the companies act, 2013;
vi. Under which deposits are accepted by a company declared as a Nidhi
vii. Falling within the meaning of chit business
viii. Contributions to a mutual fund
ix. Such other scheme or arrangement which the central government may, in consultation
with SEBI,
Collective Investment Management Company
The SEBI may reject the application after giving the applicant a reasonable
opportunity of being heard. The decision shall be communicated to the
applicant by the SEBI within 30 days of such decision stating therein the
grounds on which the application has been rejected.
BUSINESS ACTIVITIES AND OBLIGATIONS OF COLLECTIVE
INVESTMENT MANAGEMENT COMPANY
(a) If the trustee ceases to be trustee under SEBI (Debentures Trustees) Regulations, 1993; or
(b) if the trustee is in the course of being wound up; or
(c) if unit holders holding at least three-fourths of the nominal value of the unit capital of the
collective investment scheme pass a resolution for removing the trustee and SEBI
approves such resolution; or
(d) if in the interest of the unit holders, SEBI, for reasons to be recorded in writing decides to
remove the trustee for any violation of the Act
(e) if the trustee serves on the Collective Investment Management Company, a notice of not
less than three months expressing intention of not to continue as trustee.
If the trustee serves on the Collective Investment Management Company, a notice of not less
than three months expressing intention of not to continue as trustee
within three months from the date of termination of the previous trusteeship.
Termination of the Agreement with the Collective Investment
Management Company
The agreement entered into by the trustee with the Collective Investment Management
Company may be terminated –
(a) if the CIMC is in the course of being wound up as per the provisions of the Companies Act,
2013 or
(b)if unit holders holding at least three-fourth of the nominal value of the unit capital of the
collective investment scheme pass a resolution for terminating the agreement with the
CIMC and the prior approval of SEBI has been obtained, or
(c)if in the interest of the unit holders, SEBI or the trustee after obtaining prior approval of
SEBI, and after giving an opportunity of being heard to the Collective Investment Management
Company, decide to terminate the agreement with the CIMC.
Another CIMC registered with SEBI, should be appointed by the trustee within three months
from the date of such termination.
Procedure for launching of collective investment schemes
∙ The CIMC shall before launching any collective investment scheme file a copy of the
offer document of the collective investment scheme with the SEBI.
∙ The offer document should also contain true and fair view of the collective
investment scheme and adequate disclosures to enable the investors to make
informed decision.
∙ SEBI may in the interest of investors require the CIMC to carry out such modifications
in the offer document as it deems fit.
∙ In case no modifications are suggested by SEBI in the offer document within 21 days
from the date of filing, the Collective Investment Management Company may issue
the offer document to the public.
Offer period
No collective investment scheme shall be open for subscription for more than 15 days.
(a) not invest the funds of the collective investment scheme for purposes other
than the objective of the collective investment scheme as disclosed in the
offer document.
(b) segregate the assets of different collective investment schemes.
(c) not invest corpus of a collective investment scheme in other collective
investment schemes.
(d) not transfer funds from one collective investment scheme to another
collective investment scheme.
Listing of Collective Investment Schemes
The units of every scheme shall be listed immediately after the date of
allotment of units and not later than six weeks from the date of closure of
the scheme.
Winding up of Collective Investment Scheme
A collective investment scheme may be wound up:
(a)on the happening of any event which, in the opinion of the trustee, requires the collective
investment scheme to be wound up and the prior approval of the SEBI is obtained; or
(b)if unit holders of a collective investment scheme holding at least three-fourth of the nominal
value of the unit capital of the collective investment scheme, pass a resolution that the scheme
be wound up and the approval of SEBI is obtained thereto; or
(c)if in the opinion of SEBI, the continuance of the collective investment scheme is prejudicial to
the interests of the unit-holders; or
(d)if in the opinion of the CIMC, the purpose of the collective investment scheme cannot be accomplished
and it obtains the approval of the trustees and that of the unit holders of the collective investment scheme
holding at least three-fourth of the nominal value of the unit capital and the approval of SEBI is obtained
thereto.
The trustee should dispose of the assets of the collective investment scheme concerned in the best interest
of the unit holders of that collective investment scheme.
General Obligations Of Collective Investment Management Company
1. The company floating CIS shall have to seek registration with SEBI as Collective
Investment Management Company (CIMC).
2. CIS shall be constituted as a two tiered structure comprising of a trust and a
CIMC.
3. At the time of application for Registration as CIMC, these entities should have a
minimum net worth of Rs. 3 crores which shall have to be increased to Rs. 5
crores within three years from the date of grant of registration.
4. Compulsory Filing of Offer Documents: Every collective investment Scheme shall
have to file offer documents with SEBI.
5. Mandatory Rating Requirement
6. No Assured Return
7. Advertisement Code
8.Subscription Period: No collective investment scheme shall be kept open for
subscription for a period of more than 15 days.
9.Duration of collective investment Schemes: The duration of the collective
investment schemes shall be for a minimum period of 3 years.
10.Listing: Units issued under the Collective Investment Schemes are to be
compulsorily listed on recognised stock exchanges.
Each collective investment scheme shall immediately after the closure of the
subscription list comply with the following conditions, namely,-
However, where the collective investment scheme fails to comply with this, Collective
Investment Management Company shall be liable to refund the application money to
the applicants.
Ponzi Scheme
A ponzi scheme is an investment from where clients are promised a large profit in short
term at little or no risk at all.