Collective Investment Schemes in India

A Collective Investment Program (CIS) is, as its name suggests, an investment program where several people come together and pool their money to invest in a particular asset (s) and share the return on investment once an agreement has been reached to pool the money. The return on the asset is divided among the group of people according to the proportion of their investment. The provisions of Section 11AA of the Securities and Exchange Board of India (SEBI) Act of 1992 state that “a program or arrangement undertaken by a company or offered by a company in which contributions or payments by investors are made to a pool with the aim of obtaining income or profits from the production of real estate managed by investors are referred to as a collective investment program”.

In short, a CIS scheme or arrangement must meet the conditions set out in Section (a) of Section 11AA of the SEBI Act. A program or agreement is made or offered by a person or entity when investors contribute or pay to a pool used to receive profits or income from real estate managed on behalf of investors and when investors do not have day-to-day control over the management and operation of such programs or agreements (CIS). Membership money or money up to and including band deposits in a collective investment program or joint property is obtained in return for membership money (pension items I and II) or income from member funds or assets in retirement (I and II).

It is mandatory for collective investment schemes to be notified in accordance with the CIS directives and regulations. Under the Securities and Law (Amendment) Act of 2014,

Participants in collective investment schemes
Collective Investment Management Company
Trustee
Fund Manager
Shareholder
Rules And Regulations
It requires that individuals and other collective investment companies receive a certificate of registration in accordance with CIS rules in order to carry out and sponsor the introduction of collective investment schemes. For the CIS, registration is mandatory in accordance with the regulations. A collective investment company that initiates a collective investment programme must register as a trust company, which indicates that the system constitutes a form of trust. Sebi also lays down other conditions to build confidence in contributors and increase transparency in the implementation of the programme. SEBI requires a collective investment management company to disclose to shareholders material data as it is critical to inform shareholders of matters that could have a negative impact on their investment. In order to curb fraudulent activity by companies, it is prohibited to provide guarantees or guarantee returns. Restrictions on the activities of undertakings for collective investment schemes are such that they cannot carry out activities other than the management of collective investment schemes and the function of trustee of other collective investment schemes. The provisions strengthen the control of confidence by requiring the appointment of directors of a company with the prior consent of the trustees of the company.