Collective Investment Schemes

As per Regulation 2(2) of the SEBI (Collective Investment Schemes) Regulations, 1999, the expression ‘collective investment scheme’ shall have the same meaning as assigned to it under section 11AA of the SEBI Act, 1992.

Proviso to Section 11AA(1) of the SEBI Act, 1992 provides that any pooling of funds under any scheme or arrangement, which is not registered with SEBI, involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme.

Section 11AA (2) of the SEBI Act, 1992 provides that the following scheme or arrangement made or offered by any person shall be a collective investment scheme under which,—

(i)the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement;

(ii)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;

(iii)the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv)the investors do not have day-to-day control over the management and operation of the scheme or arrangement.

Section 11AA (2A) of the SEBI Act, 1992 provides that any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Act shall be a collective investment scheme.

In view of the above, since Leisure Hill Cottage Ltd. collected ? 500 crore from general public under its novel scheme, “Roaming Holiday”, meeting the criteria given as above, this scheme comes under the SEBI (Collective Investment Schemes) Regulations, 1999.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 2A(iii) (Syllabus 2017).

Regulation 24(6) of the SEBI (Collective Investment Schemes) Regulations, 1999 requires that each collective investment scheme shall immediately after the closure of the subscription list comply with the following conditions, namely,-

(a)Minimum subscription amount of rupees twenty crore;

(b)Minimum twenty investors; and

(c)No person shall hold more than twenty-five percent of the assets under management of scheme.

If the collective scheme fails to comply with the above provisions, Collective Investment Management Company shall be liable to refund the application money to the applicant.

In the instant case, the minimum number of investors are only 15 and total subscription is Rs. 15 crore, hence ABC Ltd. should refund the application money to all the applicants.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 2(c) (Syllabus 2017).

As per Regulation 26 of the SEBI (Collective Investment Schemes) Regulations, 1999, following disclosures are required to be made in the offer document:

i)The Collective Investment Management Company [CIMC] shall before launching any collective investment scheme file a copy of the offer document of the collective investment scheme with the SEBI and pay filing fees. The offer document should contain information such as name of the collective investment scheme, name and address of the registered office of the CIMC and trustee, Risk Factors, Disclaimer Clause etc., as specified in the Sixth Schedule.

ii)The offer document should also contain true and fair view of the collective investment scheme and adequate disclosures to enable the investors to make informed decision.

iii)SEBI may in the interest of investors require the CIMC to carry out such modifications in the offer document as it deems fit.

iv)In case no modifications are suggested by SEBI in the offer document within 21 days from the date of filing, the CIMC may issue the offer document to the public.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 5(c) (Syllabus 2022).

Regulation 30 of the SEBI (Collective Investment Schemes) Regulations, 1999 (“CIS Regulations”) states that no collective investment scheme shall be open for subscription for more than 15 days. However, collective investment scheme may be kept open for subscription for a maximum of another 15 days subject to issuance of public notice by the Collective Investment Management Company before the expiry of initial 15 days.

Further, Regulation 24(6) of the CIS Regulations stipulates that, each collective investment scheme shall immediately after the closure of the subscription list comply with the specified conditions including having minimum subscription amount of ₹ 20 crore and minimum 20 investors. Where the collective investment scheme fails to comply with this, Collective Investment Management Company shall be liable to refund the application money to the applicants.

In the given situation, Green Earth Plantation Limited has not complied with the provisions of the CIS Regulations, due to the following reasons:

(i)Closure of Subscription List

The offer document stated that the subscription list would remain open for 15 days, however the company closed it on the 10th day without proper justification or amendment. This is not in accordance with the CIS Regulations.

(ii)Minimum Subscription Requirement

As per CIS Regulations, the scheme must raise a minimum subscription of Rs.20 crore. The company collected only ₹ 14 crore, which is below the required amount.

(iii)Minimum Number of Investors

The scheme must also have at least 20 investors, but the company received applications from only 16 investors, which does not satisfy the requirement.

(iv)Utilization of Funds

When the minimum subscription or minimum number of investors is not achieved, the scheme cannot proceed and the company must refund the entire application money to the applicants.

Therefore, Green Earth Plantation Limited has violated the CIS Regulations by closing the subscription list before the offer period and proceeding with the scheme despite not meeting the minimum subscription (₹ 20 crore) and minimum investor requirement (20 investors). Therefore, the company must refund the collected funds to the investors.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(c) (Syllabus 2022).

The SEBI has prescribed certain provisions under regulation 35 of the SEBI (Collective Investment Schemes) Regulations, 1999, regarding investment and segregation of funds. These provisions say, the Collective Investment Management Company should:

a)not invest the funds of the collective investment scheme for purposes other than the objective of the collective investment scheme as disclosed in the offer document,

b)segregate the collective investment scheme assets of different collective investment schemes,

c)not invest corpus of a collective investment scheme in other collective investment schemes,

d)not transfer funds from one collective investment scheme to another collective investment scheme.

However, it has been provided that inter-scheme transfer of collective investment scheme property may be permitted at the time of termination of the collective investment scheme with prior approval of the trustee and the SEBI.

e)not invest more than 25% of the amount raised by Collective Investment Management Company in projects owned directly or indirectly by Collective Investment Management Company.

Accordingly, M/s Diamond Teak Tree Plantation Limited can deploy the fund of the scheme in the manner as stated above.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6A(iii) (Syllabus 2022).

In accordance with the regulation 37 of the SEBI (Collective Investment Schemes) Regulations, 1999, a scheme shall be wound up upon expiry of duration specified in the collective investment scheme or on the accomplishment of the objective of the collective investment scheme as specified in the offer document.

A collective investment scheme may also be wound up:

a)on the happening of any event which, in the opinion of the trustee, requires the collective investment scheme to be wound up and the prior approval of the SEBI is obtained; or

b)if unit holders of a collective investment scheme holding at least three-fourth of the nominal value of the unit capital of the collective investment scheme, pass a resolution that the collective investment scheme be wound up and the approval of SEBI is obtained thereto; or

c)if in the opinion of SEBI, the continuance of the collective investment scheme is prejudicial to the interests of the unit-holders; or

d)if in the opinion of the Collective Investment Management Company, the purpose of the collective investment scheme cannot be accomplished and it obtains the approval of the trustees and also of the unit holders of the collective investment scheme holding at least three-fourth of the nominal value of the unit capital of the collective investment scheme with a resolution that the collective investment scheme be wound up and the approval of SEBI is obtained thereto.

Duties of Trustee:

Where a collective investment scheme is to be wound up, the trustee shall give notice disclosing the circumstances leading the winding up of the collective investment scheme in a daily newspaper having nationwide circulation and in the newspaper published in the language of the region where the Collective Investment Management Company is registered.

The trustee shall dispose of the assets of the collective investment scheme concerned in the best interest of the unit holders of that collective investment scheme.

The proceeds of sale realized, should be first utilized towards the discharge of such liabilities as are due and payable under the collective investment collective investment scheme and after making appropriate provision for meeting the expenses connected with such winding up, the balance shall be paid to the unit holders in proportion to their unit holding.

After the completion of the winding up, the trustee shall forward to SEBI and the unit holders —

(a)a report on the steps taken for realization of assets of the collective investment scheme, expenses for winding up and net assets available for distribution to the unit holders, and

(b)a certificate from auditors of the collective investment scheme to the effect that all the assets of the collective investment scheme are realized and details of the distribution of the proceeds.

The unclaimed money if any at the time of winding up shall be kept separately in a bank account by the trustee for a period of three years for the purpose of meeting investors’ claims and thereafter shall be transferred to investor protection fund, as may be specified by SEBI.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(b) (Syllabus 2017).

(i)Regulation 40 of the SEBI (Collective Investment Schemes) Regulations, 1999 provides that:

(a)Every Collective Investment Management Company shall-

•keep and maintain proper books of account, records and documents, for each collective investment scheme so as to explain its transactions and to disclose any point of time the financial position of each collective investment scheme and in particular give a true and fair view of the state of affairs of the collective investment scheme, and

•intimate to the SEBI and the trustees the place where such books of account, records and documents including computer records are maintained.

(b)Every Collective Investment Management Company shall continue to maintain and preserve, for a period of five years after the close of each collective investment scheme, its books of account, records, computer data and documents.

(ii)Regulation 42 of the SEBI (Collective Investment Schemes) Regulations, 1999 stipulates that the Collective Investment Management Company shall-

(a)Dispatch to the unit holders the warrants within 42 days of the declaration of the interim returns.

(b)Dispatch the redemption proceeds within 30 days of the closure or the winding up of the collective investment scheme.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(c) (Syllabus 2022).

Regulation 48 of the SEBI (Collective Investment Schemes) Regulations, 1999 prescribed that the Collective Investment Management Company and the trustee, shall make such disclosures or submit such documents as they may be called upon by the SEBI to make or submit.

The Collective Investment Management Company on behalf of the collective investment scheme shall furnish the following periodic reports to the SEBI, namely:

(a)copies of the duly audited annual statements of account including the balance sheet and the profit and loss account in respect of each collective investment scheme, once a year;

(b)a copy of quarterly unaudited accounts;

(c)a quarterly statement of changes in net assets for each of the collective investment schemes.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6(e) (Syllabus 2022).

Quarterly disclosures

Regulation 49 of the SEBI (Collective Investment Schemes) Regulations, 1999 specify the provisions related to quarterly disclosures by a Collective Investment Management Company. It is prescribed that a Collective Investment Management Company, on behalf of the collective investment scheme shall before the expiry of one month from the close of each quarter that is 31st March, 30th June, 30th September and 31st December publish its unaudited financial results in one daily newspaper having nationwide circulation and, in a newspaper, published in the language of the region where the Head Office of the Collective Investment Management Company is situated.

However, the quarterly unaudited report shall contain details as specified in the SEBI (Collective Investment Schemes) Regulations, 1999 and such other details as specified in the regulations and as are necessary for the purpose of providing a true and fair view of the operations of the collective investment scheme.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6A(ii) (Syllabus 2022).

(i)Section 11AA (2) of the SEBI Act, 1992 provides that any scheme of arrangement shall be a collective investment scheme made or offered by any person under which, --

(i)the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement;

(ii)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;

(iii)the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not. is managed on behalf of the investors;

(iv)the investors do not have day-to-day control over the management and operation of the scheme or arrangement.

In view of the above, the Malamal scheme is in the nature of Collective Investment Scheme in the given case.

As per Section 12(1B) of the SEBI Act, 1992, no person shall sponsor or cause to be sponsored or carry on or caused to be carried on any venture capital funds or collective investment schemes including mutual funds, unless he obtains a certificate of registration from the SEBI in accordance with the regulations. Further, Regulation 4 of the SEBI (Collective Investment Schemes) Regulations, 1999 provides that any person proposing to carry any activity as a Collective Investment Management Company on or after the commencement of these regulations shall make an application to the SEBI for the grant of registration.

(ii)Directions by the SEBI

The SEBI may, in the interests of the securities market and the investors, give such directions as it deems fit in order to ensure effective observance of these regulations, including directions:

(a)requiring the person concerned not to collect any money from investors or to launch any collective investment scheme;

(b)prohibiting the person concerned from disposing of any of the properties of the collective investment scheme acquired in violation of these regulations;

(c)requiring the person concerned to dispose of the assets of the collective investment scheme in a manner as may be specified in the directions;

(d)requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the collective investment scheme;

(e)prohibiting the person concerned from operating in the capital market or from accessing the capital market for a specified period.

The SEBI has issued directions pursuant to the aforesaid regulations in the matter of Dairyland Plantations (India) Limited.

Further, as per Section 15D of the SEBI Act, 1992, if any person, who is required under SEBI Act or any rules or regulations made thereunder to obtain a certificate of registration from the SEBI for sponsoring or carrying on any collective investment scheme, sponsors or carries on any collective investment scheme, without obtaining such certificate of registration, he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which he sponsors or carries on any such collective investment scheme subject to a maximum of one crore rupees.

(iii)The duration of the collective investment scheme shall not be of less than three calendar years. The instant scheme is for two calendar year, which is in contravention to the SEBI (Collective Investment Schemes) Regulations, 1999.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 4(b) (Syllabus 2017).

As per SEBI Act, 1992, following scheme or arrangement shall not be a collective investment scheme:

(i)made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State;

(ii)under which deposits are accepted by non-banking financial companies as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934;

(iii)being a contract of insurance to which the Insurance Act, 1938, applies;

(iv)providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employee Provident Fund 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 a 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 the Chit Fund Act, 1982;

(viii)under which contributions made are in the nature of subscription to a mutual fund;

(ix)such other scheme or arrangement which the Central Government may, in consultation with SEBI, notify.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 1(a) (Old syllabus).

Notwithstanding anything contained in sub-section (2) or sub-section (2A) of the SEBI Act, 1992 any scheme or arrangement:

(i)made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State :

(ii)under which deposits are accepted by non-banking financial companies as defined in clause (f) of section 45-1 of the Reserve Bank of India Act, 1934;

(iii)being a contract of insurance to which the Insurance Act, 1938, applies;

(iv)providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund 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 a 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 the Chit Fund Act, 1982;

(viii)under which contributions made are in the nature of subscription to a mutual fund;

(ix)such other scheme or arrangement which the Central Government may in consultation with SEBI notify, shall not be collective investment scheme.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 2A(ii) (Old syllabus).

(i)The Collective Investment Scheme is prohibited to provide guaranteed assured returns, as per the SEBI (Collective Investment Schemes) Regulations, 1999. However, the indicative return may be indicated in the offer document only, if the same is assessed by the appraising agency and expressed in monetary terms.

(ii)Collective investment scheme shall not be open for subscription for more than fifteen days. However, collective investment scheme may be kept open for subscription for a maximum of another fifteen days subject to issuance of public notice by the Collective Investment Management Company before the expiry of initial fifteen days.

(iii)SEBI (Collective Investment Schemes) (Amendment) Regulations, 2022 had dispensed the requirement of unit certificates. It now requires that the Collective Investment Management Company shall issue to the applicant, whose application has been accepted, the units only in dematerialized form within a period of five working days from the date of closure of the subscription list.

(iv)The Collective Investment Management Company shall refund the application money to the applicants, if the collective investment scheme fails to receive the minimum subscription amount. In the event of failure to refund the amounts within the specified period, the Collective Investment Management Company shall pay interest to the applicants at a rate of 15% per annum on the expiry of five working days from the date of closure of the subscription list.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(a) (Syllabus 2017).

A Ponzi Scheme is an investment from where clients are promised a large profit in short term at little or no risk at all.

The Securities and Exchange Board of India is the regulatory authority of the Collective Investment Scheme.

The Key aspects for launching a Collective Investment Scheme (CIS) as per the SEBI (Collective Investment Scheme) Regulations, 1999 are given hereunder -

1.The company floating CIS shall have to seek registration with SEBI as Collective Investment Management Company (CIMC).

2.CIS shall be constituted as a two tiered structure comprising of a trust and a CIMC.

3.At the time of application for Registration as CIMC, these entities should have a minimum networth of Rs. 3 crores which shall have to be increased to Rs. 5 crores within three years from the date of grant of registration.

4.Every collective investment Scheme shall have to file offer documents with SEBI containing adequate disclosures to enable the investors to take informed investment decisions.

5.Each collective investment scheme shall have to obtain a rating from recognised credit rating agencies.

6.The collective investment scheme must also be appraised by an appraising agency.

7.The collective investment schemes are prohibited from guaranteeing assured returns. Indicative returns, if any, provided by the collective investment scheme shall be based on the projections in the appraisal report.

8.Advertisements in respect of every collective investment scheme shall have to conform to the SEBI’s advertisement code.

9.No collective investment scheme shall be kept open for subscription for a period of more than 90 days. The collective investment schemes must indicate the minimum and maximum amount proposed to be raised over this period.

10.The collective investment schemes shall be close ended in nature.

11.The duration of the collective investment schemes shall be for a minimum period of 3 years.

12.Compulsory Insurance cover for the assets of the collective investment scheme and personal indemnity cover for the CIMC shall be obtained.

13.Units issued under the Collective Investment Schemes are to be compulsorily listed on recognised stock exchanges.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2(c) (Syllabus 2017).

The trustees have a right to obtain from Collective Investment Management Company (CIMC) such information as is considered necessary by the trustee and to inspect the books of accounts and other records relating to the Scheme. The trustee should ensure that the CIMC has:

i.the necessary office infrastructure;

ii.appointed all key personnel including managers for the schemes and submitted their bio-data which shall contain the educational qualifications and past experiences in the areas relevant for fulfilling the objectives of the schemes;

iii.appointed auditors from the list of auditors approved by SEBI to audit the accounts of the scheme;

iv.appointed a compliance officer to comply with the provisions of the Act and these regulations and to redress investor grievances;

v.appointed registrars to an issue and share transfer agent;

vi.prepared a compliance manual and designed internal control mechanisms including internal audit systems;

vii.taken adequate insurance for the assets of the scheme;

viii.not given any undue or unfair advantage to any associates of the company or dealt with any of the associates in any manner detrimental to the interest of the unit holders;

ix.operated the scheme in accordance with the provisions of the trust deed, these regulations and the offer document of the scheme(s);

x.undertaken the activity of managing schemes only;

xi.taken adequate steps to ensure that the interest of investors of one scheme is not compromised with the object of promoting the interest of investors of any other scheme;

xii.maintained minimum net worth on a continuous basis and shall inform the SEBI immediately of nay shortfall;

xiii.been diligent in empanelling the marketing agents and in monitoring their activities.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 2(c) (Syllabus 2017).