Collective Investment Scheme
• A Collective investment scheme is any scheme or arrangement, which satisfies the
conditions, referred to in § 11 AA (2) of the SEBI Act.
• The definition of CIS excludes mutual funds or unit trust schemes.
• Any scheme or arrangement made or offered by any company under which the
contributions, or payments made by the investors, are pooled and utilised with a view to
receive profits, income, produce or property, and is managed on behalf of the investors is
a CIS.
• Investors do not have day to day control over the management and operation of such
scheme or arrangement.
• CISs are regulated by the securities market regulator – SEBI - under SEBI (Collective
Investment Scheme) Regulations, 1999.
• 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.
• A registered Collective Investment Management Company is eligible to raise funds from
the public for a particular Scheme and in turn issues them what are called “units” (which
are essentially shares of that Scheme given in proportion to the contribution made by the
investor). These units, by law, have to be compulsorily listed on the stock exchange
platform.
• As per the SEBI Act, the following activities have been exempted from the CIS
Regulations. Any scheme or arrangement:
o made or offered by a co-operative society
o under which deposits are accepted by non-banking financial companies
o being a contract of insurance
o providing for any scheme, Pension Scheme or the Insurance Scheme framed
under the Employees Provident Fund
o under which deposits are accepted under Public Offers by Companies
o under which deposits are accepted by a company declared as a Nidhi or a mutual
benefit society
o falling within the meaning of Chit business as defined in § 2 (d) of the Chit Fund
Act, 1982(40 of 1982);
o under which contributions made are in to a mutual fund;
• In 2013, in the backdrop of Sahara / Sharada scams, SEBI modified the definition of CIS
to 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.
