SEBI Directions on Collective Investment Scheme

May 17, 2022

Securities and Exchange Board of India (SEBI) amended collective investment schemes (CIS) rules.

What are the new regulations?

SEBI enhanced the net worth criteria and track record requirements for entities managing collective investment schemes (CIS). Applicants or promoters of CIS should have a soundtrack record in all their business transactions.
Minimum 20 investors and a subscription amount of at least ₹20 crores is mandated by SEBI for each CIS. At present, there are no rules regarding a minimum number of investors or minimum subscription amount.
SEBI also capped cross-shareholding in Collective Investment Management Company (CIMC) to 10% to avoid conflict of interest.
CIMCs should have a minimum net worth of ₹50 crores. At present, the net worth requirement is ₹5 crores.

What are the objectives of new regulations?

To strengthen the regulatory framework for collective investment schemes (CIS) and to empower the Collective Investment Management Companies (CIMCs) to properly discharge their responsibilities towards their investors.

When the collective investment schemes (CIS) rules were first notified?

The collective investment schemes (CIS) rules were first notified in 1999. However, they were not reviewed since then.

What is a collective investment scheme (CIS)?

It is a scheme under which the contributions made by the investors are pooled and the units of the schemes are listed on a stock exchange.

What is the structure of the collective investment scheme (CIS)?

There is a two-tier structure consisting of the Collective Investment Management Company (CIMC) and trustees. The CIMC floats and manages a CIS, whereas the trustees are the guardian of the funds.

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