Sebi notifies rules on Collective Investment Schemes
Mandates a minimum of 20 investors and a subscription amount of at least Rs20 cr for each CIS
image for illustrative purpose
New Delhi: To strengthen the regulatory framework for Collective Investment Schemes (CIS), markets regulator Sebi has enhanced the net worth criteria and track record requirements for entities managing such schemes.
Also, the regulator has mandated a minimum of 20 investors and a subscription amount of at least Rs20 crore for each Collective Investment Scheme, according to a notification on Tuesday. Currently, CIS rules do not mandate minimum number of investors, maximum holding of a single investor or minimum subscription amount. In addition, the regulator has put a cap on cross-shareholding in Collective Investment Management Company (CIMC) to 10 per cent to avoid conflict of interest .
To give this effect, the Securities and Exchange Board of India (Sebi) has amended CIS regulations. The rules, first notified in 1999, have not been reviewed since then. The move comes after the board of Sebi approved a proposal in this regard in its board meeting in March. The new rule is aimed at strengthening the regulatory framework for collective investment schemes as well as empower the CIMCs to effectively discharge their responsibilities towards the investors.
CIS is a pooled investment vehicle in closed-ended investment space and the units of the schemes are listed on an exchange. The structure of CIS is a two-tier one as there are two entities involved in the process -- the CIMC and trustees. CIMC is created to float and manage a CIS and the trustee is appointed as guardian of the funds and assets.
With regard to eligibility criteria, Sebi said applicant or its promoters should have a sound track record and general reputation of fairness and integrity in all their business transactions. The applicant should have been carrying out business in the relevant field in which CIS schemes are proposed to be launched, for a period of at least five years; net worth should be positive in all the immediately preceding five years and should have profits in three out of the five years.
