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‘Many hands make light work’ is a proverb most of us are undoubtedly familiar with. Ideally, this means the coming together of people for a cause. It wouldn’t be entirely wrong to speculate that the Collective Investment Scheme was born bearing in mind principles of a similar nature. In simple words, a collective investment scheme is where a group of people come together and pool their money into an asset. The returns earned on the asset is then divided amongst the group based on the proportion of their investment.
Section 11AA (2) of the Securities and Exchange Board of India (SEBI) Act, 1992 states that any scheme or arrangement made or offered by any company under which the contributions or payments made by investors are pooled together with the objective of receiving income, profits, produce or property and is managed on behalf of the investors is called a Collective Investment Scheme. CIS is an arrangement or scheme which should satisfy the following conditions:
The SEBI Ordinance, 2013, stated that any scheme or arrangement which is not registered with the SEBI, under which there is any pooling of funds where the corpus amounts to one hundred crore rupees or more, shall be deemed to be a Collective Investment Scheme.
Any scheme or arrangement:
Collective Investment Management Company
As per the Collective Investment Scheme Regulations, 1999, it is imperative that the CIS is constituted in the form of a Trust. The Trustee observes the rules and regulations set in place and works for the benefit of the unit holders, safeguards the assets and ensures that it stays compliant throughout. It is the Collective Investment Management Company that appoints the Trustee who holds the property of the CIS.
As the name suggests, the fund manager is the one that manages the funds of the CIS and oversees and manages all the investment decisions of the CIS. The fund manager also performs the following functions:-
Also known as unit holders, these are the individuals that pool in their money into the scheme. As a result, they have a right to receive the returns generated on their investment as well as the right to the asset to the extent of their share and on the basis of the agreement signed at the time of entering into the scheme.
The application for grant of registration with the SEBI has to be furnished in Form A with the necessary documents and the prescribed fees.
Where the Board is of the opinion that the application is complete in all respects and that the applicant fulfils the eligibility criteria, an intimation will be made to the applicant for the payment of the fees. Once the fees have been paid and duly received, the Board will grant the Certificate of Registration.
Where the Board is of the opinion that the application does not quite measure up to the criteria, it may reject the application. However, before rejecting the application, a time period of one month may be given to the applicant to sort out all the discrepancies in the application. Once the Board is satisfied that the application is complete, it may consider the same for approval.
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