Collective Investment Scheme - tradecareer

  Collective Investment Scheme

INTRODUCTION

A collective investment scheme is a trust based scheme that comprises a pool of assets that is managed by a collective investment scheme manager and is governed by the Collective Investment Schemes Regulations given by SEBI.

The sums of money that are exchanged on the Stock Exchange and in the money markets make them too pricy for most people. With a CIS, the money or funds from a group of investors are pooled or collected together to form a CIS portfolio.

COLLECTIVE INVESTMENT SCHEME

A collective investment scheme is a scheme that comprises a pool of assets that is 

managed by a collective investment scheme manager and is governed by the Collective 

Investment Schemes Regulations given by SEBI.

The investor hold a portion of the scheme known as Units of CIS. Investors do not have 

day-to-day control over the management and operation of such scheme or arrangement.

                                                                       

Definition of Collective Investment Scheme

Section 11AA of the SEBI Act, 1992 defines it as any Scheme or Arrangement made or 

offered by any company under which

a) The contributions, or payments made by the investors, by whatever name called, are 

pooled and utilised solely for the purposes of the scheme or arrangement;

b) 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;

c) The property, contribution or investment forming part of scheme or arrangement, 

whether identifiable or not, is managed on behalf of the investors; and

d) The investors do not have day-to-day control over the management and operation of 

the scheme or arrangement.

On the backdrop of Sahara/Saradha scams, in 2013 SEBI modified the definition of 

Collective Investment Scheme and include any scheme/arrangement floated by any 

person (instead of a company as was defined earlier) and any such scheme with corpus 

of more than Rs. 100 Crore shall also be deemed to be a CIS by SEBI.

                                                                 

The Securities Laws (Amendment) Act, 2014 defines it "Any pooling of funds under any 

scheme or arrangement, which is not registered with SEBI, involving a corpus amount 

of Rs. 100 crore or more shall be deemed to be a collective investment scheme

In short, A Collective Investment Scheme (CIS), as its name suggests, is an investment 

scheme wherein several individuals come together to pool their money for investing in 

a particular asset(s) and for sharing the returns arising from that investment as per the 

agreement reached between them prior to pooling in the money.

"Close ended collective investment scheme" means any collective investment scheme 

launched by a collective investment management company, in which the maturity 

period of the collective investment scheme is specified and there is no provision for 

repurchase before the expiry of the collective investment scheme.

• The CIS, however, does not include any Scheme or Arrangement:

i. Made or offered by a co-operative society,

ii. Under which deposits are accepted by non-banking financial companies,

iii. Being a contract of insurance,

iv. Providing for any Scheme, Pension Scheme or the Insurance Scheme framed 

under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952,

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 Nidhi or a mutual 

benefit society under section 406 of the Companies Act, 2013,

vii. Falling within the meaning of Chit business as defined in clause (d) of section 2 of 

Chit Fund Act, 1982, and

viii. Under which contributions made are in the nature of subscription to a mutual 

fund.