How to Register a Collective Investment Scheme in India: A Step-by-Step Guide
A Collective Investment Scheme is defined as a scheme or arrangement made or offered by a company under which the contributions or payments made by investors are pooled together with the goal of receiving income, profits, produce, or property and is managed on behalf of the investors, according to Section 11AA (2) of the Securities and Exchange Board of India (SEBI) Act, 1992.
What is a Collective Investment Scheme?
A ‘complicated’ expression that it might sound. A Collective Investment Scheme is a company made up of thousands of individual investors in its name who each contribute the same amount of money. The contributors pool their money and invest in the company. Many companies, which cater to the needs of the small investor, offer Collective Investment Schemes. In other words, if you have a major money manager or mutual fund you can also invest in a Collective Investment Scheme. Don’t invest in mutual funds. Invest in collective investment schemes instead. Having smaller investments coming from many people has the potential to provide you with a steady income.
Types of Collective Investment Schemes
A collective investment scheme is a company law structure that is usually called a private company limited by guarantee (PCLB). There are five types of collective investment: unit trusts, open-ended investment companies (OEIC), investment trusts, exchange-traded funds (ETFs), and unregulated collective investment schemes (UCIS). A collective investment scheme can be formed under companies, trusts, and societies. These are all types of investment schemes that have various benefits and challenges. The rules of the scheme need to be made by the appropriate statutory authority, which is often a board of directors or a trustee, and then regulated by the Central Securities Depository Limited (CSDL) or a stock market regulatory authority. If you are planning to form a collective investment scheme Registration, one of the first steps to take is to identify the type of investment scheme you would like to set up. One of the most popular types of investment schemes is a joint-stock company.
CIS Registration Eligibility
The following are the requirements for joining a collective investment program.
- Under the Companies Act of 1956, the applicant must be formed and registered as a corporation.
- One of the main goals of the applicant’s Memorandum of Association is the management of collective investment schemes.
- The applicant’s directors/key personnel must be honest and trustworthy persons with sufficient professional expertise in the field. They must not have been convicted of a crime involving moral turpitude, a financial crime, or a securities law violation.
- The Board has never previously refused registration to anyone connected to the applicant, whether directly or indirectly.
- The applicant is qualified to receive such a certificate of registration as an individual.
- The applicant possesses appropriate infrastructure to enable it to operate collective investment schemes in compliance with applicable rules.
- Individuals who are not directly or indirectly affiliated with the individuals who have control over the concerned Collective Investment Management Company shall make up at least half of the board of such Collective Investment Management Companies.
The process of Registering a Collective Investment Scheme in India
First, the company registering a Collective Investment Scheme must register itself under the Act and take certain formalities to protect the interest of the investors. The SEBI Act lays down the relevant rules under which a company can register a collective investment scheme in India. The Act lays down that a company can only register such schemes with a special provision called “class up”. In the event that a company fails to register itself under Section 45-B of the Act for certain acts or omissions, it is not allowed to register a collective investment scheme in India. In such a case, the company may be charged with section 45-A for offering to the public in India any “investment, scheme, contract, trust, etc.,” of any nature or description whatsoever without registration with SEBI.
In the day-to-day activity of trading or investing, it is very important to be smart and explore the available investment opportunities available in India. One of the available options is choosing Mutual Funds and Direct Investments that will help you in achieving your financial goals in a direct manner.
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