Introduction: Collective Investment Scheme

According to section 11AA (2) of SEBI act, any scheme or arrangement made or offered by any company under which the contributions, or payments made by inventors, are pooled underutilized with a view to receive profits, income, produce, or property & is managed on behalf of the investors is a Collective Investment Scheme.

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Investors do not have any day-to-day control over the management and operation of such a scheme or arrangement. 

Through the SEBI ordinance 2014, any pooling of funds under any scheme or arrangement, which is not registered with SEBI, involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme.

Which are the schemes not treated as CIS?

The following do not constitute a collective investment scheme: 

• Any scheme or arrangement made or offered by a co-operative society or a society registered under the society act.
• Any scheme or arrangement under which deposits are accepted by non-banking financial companies 
• Any scheme or arrangement being a contract of insurance to which the Insurance Act, applies. 
• Any scheme or arrangement providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. 
• Any scheme or arrangement under which deposits are accepted under section 73 to 76 of the Companies Act, 2013. 
• Any scheme or arrangement falling within the meaning of Chit business as defined in clause (d) of section 2of the Chit Fund Act, 1982. 
• Any scheme or arrangement under which contributions made are in the nature of subscription to a mutual fund.

What is Collective Investment Management Company

It is a company incorporated under the provisions of the Companies Act, 2013 and registered with SEBI under the SEBI (Collective Investment Schemes) Regulations, 1999, whose object is to organise, operate and manage a Collective Investment Scheme.

No person other than a Collective Investment Management Company which has obtained a certificate under these regulations shall carry on or sponsor or launch a collective investment scheme.

Any person proposing to carry any activity as a Collective Investment Management Company on or after the commencement of these regulations shall make an application to the Board for the grant of registration in Form A.

Eligibility condition for registration of collective investment Management Company 

• The applicant is set up and registered as a company under the Companies Act, 1956; 
• The applicant has, in its Memorandum of Association specified the managing of collective investment scheme as one of its main objects; 
• The applicant has a net worth of not less than rupees 5 crores
• Provided that at the time of making the application the applicant shall have a minimum net worth of rupees three crores which shall be increased to rupees five crores within three years from the date of grant of registration; 
• The applicant is a fit and proper person for the grant of such certificate;
• The applicant has adequate infrastructure to enable it to operate collective investment scheme in accordance with the provision of these regulations;
• The directors or key personnel of the applicant shall consist of persons of honesty and integrity having adequate professional experience in related field and have not been convicted for an offense involving moral turpitude or for an economic offense or for the violation of any securities laws; 
• At least fifty percent of the directors of such Collective Investment Management Company shall consist of persons who are independent and are not directly or indirectly associated with the persons who have control over the Collective Investment Management Company; 
• No person, directly or indirectly connected with the applicant has in the past been refused registration by the Board under the Act.

And the Corpseed team will help you get the registration of Collective Investment Management Company.

Some condition needs to be followed by a collective investment management company:

• There has to be a minimum capital requirement (that is 3 crore initially which will grow to 5 crores in next 3 year from incorporation)
• It has prescribed certain corporate governance in the company.
• Independent director should be 50% of the total number of director.
• There should be a trust 
• The trustee and directors should be fit and proper person (they have to be approved by SEBI board)
• The type of investment that they can make that has been prescribed along with the restriction on activities of the collective investment management company.

Appointment of trustee

A Collective Investment Management Company shall appoint a trustee who shall hold the assets of the collective investment scheme for the benefit of unitholders.

Eligibility for appointment as a trustee. 

• Only persons registered with the Board as Debenture Trustee under Securities and Exchange Board of India (Debenture Trustee) Regulations, 1993 shall be eligible to be appointed as trustees of collective investment scheme. 
• Provided that no person shall be eligible to be appointed as trustee, if he is directly or indirectly associated with the persons who have control over the collective investment management company. 
• The Collective Investment Management Company shall furnish to the Board particulars as specified in Form C in respect of trustees appointed.

Restriction on the business activity of collective investment Management Company

• The collective investment Management Company shall not-
• Undertake any other activity other than managing the collective investment scheme
• Act as a trustee of any collective investment scheme
• launch any collective investment scheme for the purpose of investing in securities
• Invest in any collective investment scheme floated by it.
• If it makes a disclosure of its intention to invest in the offer document of the collective investment scheme,

Does not charge any fees on its investment in that collective investment scheme.

A registered Collective Investment Management Company is eligible to raise funds from the public by launching schemes. Such schemes have to be compulsorily credit rated as well as appraised by an appraising agency. The schemes also have to be approved by the Trustee and contain disclosures, as provided in the Regulations, which would enable the investors to make an informed decision. A copy of the offer document of the scheme has to be filed with SEBI and if no modifications are suggested by SEBI within 21 days from the date of filing then the Collective Investment Management Company is entitled to issue the offer document to the public for raising funds from them.

Listing of collective investment scheme

The units of every collective investment 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 collective investment scheme on each of the stock exchanges as mentioned in the offer document. 

Submission of information and documentation

• The Collective Investment Management Company shall prepare quarterly reports (i.e., as at the end of March, June, September, and December) on its activities and the position regarding compliance with these regulations and submit the same to the trustees within one month of the expiry of each quarter. 
• The Collective Investment Management Company shall file with the trustee and the Board—   (a) particulars of all its directors along with their interest in other companies within fifteen days of their appointment; and 
• Any change in the interests of directors, within fifteen days of such change. 
• The Collective Investment Management Company shall furnish a copy of the Balance Sheet, Profit and Loss Account and a copy of the summary of the yearly appraisal report to the unit holders within two months from the closure of the financial year. 
• The Collective Investment Management Company shall furnish to the Board and the trustee such information and documents to the Board and the trustee as may be required by them concerning the affairs of the 34[collective investment scheme].

Whom to approach for Grievance Redressal?

Investors should approach CIS in this regard. If investors do not get satisfactory responses thereto, they may write to SEBI. Further, investors can approach district consumer redressal forums in case entities to fail to honor their commitments or for any deficiency in service. For bouncing of cheques, investors can move the courts under section 138 of the Negotiable Instruments Act as the right to file criminal complaints exclusively vests with the beneficiary of the cheque. Investors should further note that wherever they do not have a right to the land or to the products arising out of the land such investment may be a deposit and where a company fails to repay the deposits, it attracts the provisions of section 73 of the Indian Companies Act, 2013. It is clarified that SEBI has no jurisdiction over such deposits.