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Collective Investment Schemes

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What does Collective Investment Schemes?

There are several investment opportunities for a better return, and one of the ways to save mutual investment scheme among them. It can be defined as any scheme or agreement produced or provided by any company under which the investors make the contributions or payments for the development of a pool of money, which is then used for the purpose of collecting revenues, revenue, output and properties, which are then taken care of by the manager on behalf of the investors. It can be defined as any scheme or agreement produced or provided by any company under which the investors make the contributions or payments for the development of a pool of money, which is then used for the purpose of collecting revenues, revenue, output and properties, which are then taken care of by the manager on behalf of the investors.

Scheme that is not a collective investment scheme is as described below:

  • Scheme that does not constitute a Collective Investment Scheme shall be any scheme or arrangement made or provided by a cooperative society as described below;
  • Any scheme or arrangement by which deposits are approved by non-bank financial companies;
  • Any scheme or arrangement that is an insurance contract;
  • Pension scheme or insurance plan under the Employees Provident Fund; Deposits which are accepted under section 58A of the Companies Act, 1956 in any scheme or arrangement
  • Any scheme or arrangement under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society;
  • Any scheme or arrangement falling within the meaning of Chit business as defined in clause (d) of section 2of the Chit Fund Act, 1982 (40 of 1982);
  • Contributions which are made in the nature of subscription to a mutual fund under any scheme or arrangement;

Brief the history of Collective Investment Schemes in India

In the 1990s, many agro- and plantation companies in India started pooling people's money with a pledge of high returns of around 18-30 percent. Sadly, they paid no interest or principal to the investors. The Government of India, by means of a 1997 press release, therefore announced its intention to create an effective regulatory framework for the regulation of entities that issue instruments such as plantation bonds or agro-based bonds to citizens. It decided to treat schemes to issue such instruments as "collective investment schemes" to be governed by SEBI. This finally came out in this direction with the announcement of the CIS regulation of "SEBI (Collective Investment Schemes) Regulations, 1999."

Companies of Collective Investment Management

Collective Investment Management Company is a company registered under the Companies Act, 2013 (or earlier Companies Act, 1956) with the main purpose of organizing, running and managing a collective investment scheme and registering with SEBI under the SEBI Regulations, 1999.

What are the steps for obtaining the registration under SEBI?

  • Collective Investment Management Company that has obtained a certificate under these Regulations shall continue, sponsor or initiate a collective investment scheme.
  • Any person who wishes to start an operation as a Collective Investment Management Company shall therefore send to the Board an application for registration in the prescribed Form A together with a prescribed document and a non-refundable fee set out in Schedule 11 of the Regulations.
  • Upon receipt of the appeal, the board may reject the incomplete or non-compliant requirements set out in the respective regulations. Before refusing any such appeal, any inconsistencies may be eliminated within one month. The time limit may also be extended if reasonable cause is shown to the board or the board may even order the applicant to provide the required additional information or explanation or even direct the person to appear before the board in person in connection with the award of a certificate.
  • The board shall consider whether the applicant's eligibility criteria are in compliance with the legislation before issuing the certificate as stated below:
  • Applicant is registered as a corporation under the Companies Act, 1956 or the Companies Act, 2013
  • Memorandum of Association defined as the main purpose of the joint investment scheme, net worth of company should not be less than INR Five Crores;
  • Applicant should have adequate infrastructure to allow the collective investment scheme to be run in accordance with the provisions of these regulations;
  • Directors or key personnel should be individuals of honesty and integrity who have sufficient professional experience in the related field and who have not been convicted of an offense;
  • At least 50% of the directors of the Company should consist of people who are autonomous and who are not directly or indirectly affiliated with persons owned by the Collective Investors;
  • Once the board is satisfied that the applicant meets the eligibility criteria set out above, the applicant is requested to pay the fees needed. Give the certificate of incorporation in Form B after collecting the necessary fees.
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