Regulation of Collective Investment Scheme

Press Release

26th November 1997
Ref No. PR 143/97

REGULATION OF COLLECTIVE INVESTMENT SCHEMEPRIMARY MARKET DEPARTMENT

The Central Government has by a press release dated 18/11/97 decided that an appropriate regulatory framework for regulating entities which issue instruments such as agro bonds, plantation bonds etc. has to be put in place. The Government has decided that schemes through which such instruments are issued would be treated as collective investment schemes coming under the provisions of the SEBI Act. In terms of the press release, SEBI has initiated action for drafting regulations for such collective investment schemes.

The provisions of section 12(1)(B) of the SEBI Act prohibits collective investment schemes including mutual funds from sponsoring any new scheme till the regulations are notified. While the regulations for mutual fund schemes have been notified by SEBI, regulations for collective investment schemes including plantations schemes require to be notified in view of the press release issued by the Central Government. These regulations are under preparation and will be issued in due course, first in draft form for the public discussion and later in the final form. Till these regulations are notified, as a result of the provisions of section 12(1)(B) of the SEBI Act no person can sponsor or cause to be sponsored any new collective investment scheme and raise further fund.

The proviso to section 12(1)(B) provides that till regulations are notified all collective investment schemes which are in existence can continue with their activities till the regulations are notified. Any collective investment scheme which is desirous of taking benefit of the proviso to section 12(1)(B) of the SEBI Act is directed to send to SEBI information within 21 days from today containing details such as :-

• Terms and conditions of the schemes launched
• Funds raised through all the schemes
• Promises or assurances or assured returns made in the scheme
• Copies of offer document of the scheme
• Names, details and background of promoters/sponsors.

All collective investment schemes which want to take benefit of the proviso of Section 12(1)(B) are also directed to make an advertisement only in accordance with the advertisement code already prescribed by SEBI under the Disclosure and Investor Protection Guidelines.