Collective Investment Schemes
As per the Securities Laws (Amendment), Act 2014 when a corpus amount of Rs 100 crore or more is sourced from investors is called Collective Investment Scheme (CIS). It is compulsory for every CIS to register with SEBI and obtain a credit rating from a verified rating agency. Entities which are regulated like insurers, chit funds(registered) co-operative societies, mutual funds are exempted from CIS even if they fulfil the criteria of CIS.
Conditions to be a CIS
As per the Section 11AA of SEBI Act, any scheme can be called a CIS only if it fulfils the following criteria:
- Money is pulled through investors and contributors
- The day to day control is free from investor control
- Rs 100 crore corpus or more has been raised
- The contribution is made to earn material profits.
Latest Norms of CIS
Any person who wishes to launch a CIS will be required to register as a Collective Investment Management Company (CIMC). CIMC has to register with a depository for dematerialization and also follow the rules of Know Your Client norms. All the finance which is raised for any CIS will be paid through a banking channel like cheque, draft, net banking but not via cash to prevent misuse and increase the transparency in the scheme. This will also help in identifying the source of the investment.