GAZETTE OF INDIA

EXTRAORDINARY
PART II - SECTION 3 - SUB-SECTION (ii)
PUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
MUMBAI, OCTOBER 15, 1999
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 1999

EXTRAORDINARY
PART II - SECTION 3 - SUB-SECTION (ii)
PUBLISHED BY AUTHORITY
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
MUMBAI, 17th January, 2002
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEMES) (AMENDMENT) REGULATIONS, 2002


GAZETTE OF INDIA

EXTRAORDINARY
PART II - SECTION 3 - SUB-SECTION (ii)

PUBLISHED BY AUTHORITY

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

MUMBAI, OCTOBER 15, 1999

SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 1999

 

S.O.No. 1035(E) In exercise of the powers conferred by section 30 read with section 11 and section 19 of the Securities and Exchange Board of India, Act 1992, (15 of 1992) the Securities and Exchange Board of India hereby makes the following regulations, namely:



PLEASE REFER TO THE GAZETTE COPY OF THIS NOTIFICATION


 

 

CHAPTER I

PRELIMINARY

Short title and commencement

1.(1) These regulations may be called the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999. 

(2) They shall come into force on the date of their publication in the Official Gazette.

Definitions

2.(1) In these regulations, unless the context otherwise requires: 

(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of 1992); 

(b) "advertisement" includes: 

  1. notices, brochures, pamphlets, circulars, showcards, catalogues, hoardings, placards, posters, insertions in newspapers, pictures, films and cover pages of offer documents;
  2. any other matter to which publicity is given through print medium, radio, television programmes or electronic media; 

(c) "appraising agency" means an agency empanelled with the Board for the purpose of conducting technical or financial appraisal of the scheme; 

(d) "associate" in relation to a collective investment management company or trustee, includes a person: 

(i) who, directly or indirectly, by himself, or in combination with other persons, exercises control over the Collective Investment Management Company or the trustee, as the case may be, or 

(ii) in respect of whom the Collective Investment anagement Company or the trustee, as the case may be directly or indirectly, by itself, or in combination with other persons, exercises control, or 

(iii) whose director, officer or employee is a director, officer or employee of the Collective Investment Management Company or the trustee, as the case may be; 

(e) "auditor" means a person qualified to audit the accounts of companies under the Companies Act, 1956; 

(f) "Board" means the Securities and Exchange Board of India established under the provisions of section 3 of the Act; 

(g) "certificate" means a certificate of registration granted under regulation 10 of these regulations; 

(h)"Collective Investment Management Company" means a company incorporated under the Companies Act, 1956 (1 of 1956) and registered with the Board under these regulations, whose object is to organise, operate and manage a collective investment scheme; 

(i) "collective investment scheme" has the meaning assigned to it by sub-regulation (2) of this regulation; 

(j) "closed-ended scheme" means any scheme launched by a Collective Investment Management Company, in which the period of maturity of the scheme is specified and there is no provision for re-purchase before the expiry of the maturity of the scheme; 

(k) "control" or "controlling interest" means control exercised or controlling interest held: 

(i) in case of a company, by any person or combination of persons who directly or indirectly own, control or hold shares carrying not less than 10% of the voting rights of such company; or 

(ii) as between two companies, if the same person or combination of persons, directly or indirectly, own, control or hold shares carrying not less than 10% of the voting rights of each of the two companies; or 

(iii) majority of the directors of any company who are in a position to exercise control over the Collective Investment Management Company. 

(l) "credit rating agency" means a body corporate registered under Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999; 

(m) "depository" means a body corporate as defined in the Depositories Act, 1996 (22 of 1996); 

(n) "economic offence" means an offence to which the Economic Offences (Limitation of Prosecutions) Act, 1974 (12 of 1974) applies for the time-being; 

(o) "form" means any of the forms specified as such in the First Schedule; 

(p) "fraud", has the same meaning as is assigned to it in section 17 of the Indian Contract Act, 1872 (9 of 1872); 

(q)"inspecting officer" means any person appointed as such by the Board under Chapter VII of these regulations; 

(r) "key-personnel" in relation to a company, means the persons who exercise effective control over its affairs; 

(s) "net worth" means the aggregate value of the paid up equity capital and free reserves (excluding funds created out of revaluation), reduced by the aggregate value of accumulated losses and deferred expenditure not written off, including miscellaneous expenses not written off; 

(t) "offer document" means any document by which applications for subscribing to units of the scheme are invited from the public; 

(u) "regulation" means a regulation forming part of these regulations; 

(v) "relative" means a person who is a relative, as defined in section 6 of the Companies Act, 1956 (1 of 1956); 

(w) "registrars to an issue and share transfer agent" means a person registered as Registrars to an Issue and Share Transfer Agents under the Securities and Exchange Board of India (Registrar to an Issue and Share Transfer Agents) Regulations, 1993; 

(x) "schedule" means any of the schedule appended to these regulations; 

(y) "scheme" means a collective investment scheme; 

(z) "scheme property" includes: 

(i) subscription of moneys or money's worth (including bank deposits) to the scheme; 

(ii) property acquired, directly or indirectly, with, or with the proceeds of, subscription of money referred to in item (i) of this Clause or 

(iii) income arising, directly or indirectly, from subscription money or property referred to in item (i) or (ii), 

(aa) "securities laws" means: 
 

  1. the Securities and Exchange Board of India Act, 1992 (15 of 1992);
  2. the Securities Contracts (Regulation) Act, 1956 (42 of 1956); and
  3. the Depositories Act, 1996 (22 of 1996), as amended from time to time;

(bb) "stock broker" means a stock broker as defined in Securities and Exchange Board of India (Stock Brokers and Sub-brokers) Rules, 1992; 

(cc) "trustee" means a person who holds the property of the collective investment scheme in trust for the benefit of the unit holders, in accordance with these regulations; 

(dd) "unit" includes any instrument issued under a scheme, by whatever name called, denoting the value of the subscription of a unit holder; and 

(ee) "unit holder" means a person holding a unit in a scheme. 

(2) 1"In these regulations  the expression collective investment scheme shall have the same meaning as assinged to it under Section 11AA of the Act".
-----------------------------------------
1Substituted by the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2000, vide S.O 122 (E) dated 14.02.2000 for the following "In these regulations, unless the context otherwise requires, "collective investment scheme" means any scheme or arrangement with respect to property of any description - 
 

  1. the purpose of which is to enable the investors to participate in the scheme or arrangements by way of subscriptions and to receive profits or income or produce arising from the management of such property or the investments made thereof; and
  2. in which the subscriptions of the investors by whatever name called, are pooled, and are utilised for the purposes of the schemes or the arrangements; and
  3. in which the property or such subscriptions are managed on behalf of the investors, who do not have day to day control over the management or operation of the scheme, 

whether or not such properties or subscriptions and the investments made thereof are evidenced by identifiable properties or otherwise; 

Provided that following shall not be deemed to be a collective investment scheme: 

(a) acceptance of deposits by companies under section 58A of the Companies Act, 1956 (1 of 1956) or by Non-Banking Financial Companies as defined in section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934); 

(b) acceptance of funds by Chit Funds in terms of the Chit Funds Act, 1982 (40 of 1982); 

(c) acceptance of funds by companies declared as Nidhi companies under section 620A of the Companies Act, 1956, (1 of 1956), as per directions issued under, section 637A of the said Act; 

(d) contracts of insurance under the Insurance Act, 1938 (4 of 1938); 

(e) any scheme of the employer as per Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, (19 of 1952); or any other recognised Provident Fund under the Income Tax Act, 1961; 

(f) arrangements of co-operative societies under the Co-operative Societies Act, 1912 (2 of 1912) including Co-operative Societies registered under any Provincial Act or State Act for the time being in force; 

(g) any scheme under Securities and Exchange Board of India (Mutual Funds) Regulations, 1996; or 

(h) any other scheme or arrangement specifically exempted by the Board, from the operation of these regulations". 
--------------------------------------------
(3) Words and expressions used and not defined in these regulations, but defined in the Act shall have the same meanings as are respectively assigned to them in the Act.


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CHAPTER II

REGISTRATION OF COLLECTIVE INVESTMENT MANAGEMENT COMPANY

No person other than Collective Investment Management Company to launch scheme 

3. No person other than a Collective Investment Management Company which has obtained a certificate under these regulations shall carry on or sponsor or launch a collective investment scheme.

Application for grant of certificate

4. Any person proposing to carry any activity as a Collective Investment Management Company on or after the commencement of these regulations shall make an application to the Board for the grant of registration in Form A.

Application by existing Collective Investment Schemes 

 

5.(1) Any person who immediately prior to the commencement of these regulations was operating a scheme, shall subject to the provisions of Chapter IX of these regulations make an application to the Board for the grant of a certificate within a period of two months from such date. 

(2) An application under sub-regulation (1) shall contain such particulars as are specified in Form A and shall be treated as an application made in pursuance of regulation 4 and dealt with accordingly.

Application fee to accompany the application

6. Every application for registration under regulation 4 shall be accompanied by a non-refundable application fee as specified in the Second Schedule.

Application to conform to the requirements

7. An application, which is not complete in all respects or does not conform to the requirements of regulation 6 or regulation 9 shall be rejected by the Board. 

Provided that before rejecting any such application, the applicant may be given an opportunity to remove within one month such objections as may be indicated by the Board. 

Provided further that the Board may on sufficient reasons being shown extend the time in order to enable the applicant to remove such objections. 

Furnishing information

8.(1) The Board may direct the applicant to furnish such further information or clarification as may be required by it, for the purpose of processing the application. 

(2) The Board, if it so desires, may ask the applicant or its authorised representative to appear before the Board for personal representation in connection with the grant of a certificate.

Conditions for eligibility 

9. The Board shall not consider an application for the grant of a certificate unless the applicant satisfies the following conditions, namely:- 

  1. the applicant is set up and registered as a company under the Companies Act, 1956;
  1. the applicant has, in its Memorandum of Association specified the managing of collective investment scheme as one of its main objects;
  2. the applicant has a net worth of not less than rupees five crores;
     

 

Provided that at the time of making the application the applicant shall have a minimum net worth of rupees three crores which shall be increased to rupees five crores within three years from the date of grant of registration 

  1. the applicant is a fit and proper person for the grant of such certificate;
  2. the applicant has adequate infrastructure to enable it to operate collective investment scheme in accordance with the provision of these regulations;
  3. the directors or key personnel of the applicant shall consist of persons of honesty and integrity having adequate professional experience in related field and have not been convicted for an offence involving moral turpitude or for any economic offence or for the violation of any securities laws;

(g) at least fifty per cent of the directors of such Collective Investment Management Company shall consist of persons who are independent and are not directly or indirectly associated with the persons who have control over the Collective Investment Management Company; 

(h) no person, directly or indirectly connected with the applicant has in the past been refused registration by the Board under the Act. 

Explanation: For the purposes of this clause, the Board shall take into account whether the previous application for a certificate of any person, directly or indirectly, connected with the applicant has been rejected by the Board or any disciplinary action has been taken against such person under the Act or any of the rules or any of the regulations made under the Act. 

  1. at least one of the directors, on the Board of the Collective Investment Management Company, who is not subject to retirement, is a representative of the trustee;

(j) the Collective Investment Management Company is not a trustee of any collective investment scheme.


 
 

Grant of certificate

(k) in case the applicant is an existing collective investment scheme, it complies with the provisions of Chapter IX of these regulations. 

10. (1) The Board may, on receipt of an application and on being satisfied that the applicant complies with the requirements specified in regulation 9, call upon the applicant to pay registration fee as specified in the Second Schedule. 

(2) On receipt of registration fee, the Board shall grant a certificate in Form B, on such terms and conditions as are in the interest of investors and as may be specified by the Board. 

Terms and conditions to be 
complied with

11. The certificate granted under regulation 10 shall be subject to the following conditions, namely :- 

(a) any director of the Collective Investment Management Company shall not be a director in any other Collective Investment Management Company unless such person is an independent director referred to in clause (g) of regulation 9 and approval of the board of Collective Investment Management Companies of which such person is an independent director, has been obtained; 

(b) the Collective Investment Management Company shall forthwith inform the Board of any material change in the information or particulars previously furnished, which have a bearing on the certificate granted by it; 

(c) appointment of a director of a Collective Investment Management Company shall be made with the prior approval of the trustee; 

(d) the Collective Investment Management Company shall comply with provisions of the Act and these regulations; 

(e) no change in the controlling interest of the Collective Investment Management Company shall be made without obtaining prior approval of the Board, the trustee and the unit holders holding at-least one-half of the nominal value of the unit capital of the scheme. 

(f) The Collective Investment Management Company shall take adequate steps to redress the grievances of the investors within one month from the date of receipt of the complaint from the aggrieved investor. 

Procedure where registration is not granted

12.(1) Where an application made under regulation 4 for grant of registration does not satisfy the conditions specified in regulation 9, the Board may reject the application after giving the applicant a reasonable opportunity of being heard and inform the applicant of the same. 

(2) The decision shall be communicated to the applicant by the Board within 30 days of such decision stating therein the grounds on which the application has been rejected. 

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CHAPTER III

BUSINESS ACTIVITIES AND OBLIGATIONS OF COLLECTIVE INVESTMENT MANAGEMENT COMPANY

Restrictions on business activities 

13. The Collective Investment Management Company shall not:

(a) undertake any activity other than that of managing the scheme;

(b) act as a trustee of any scheme;

  1. launch any scheme for the purpose of investing in securities;
  2. invest in any schemes floated by it.

Provided that a Collective Investment Management Company may invest in its own scheme,

(i) if it makes a disclosure of its intention to invest in the offer document of the scheme, and 

(ii) does not charge any fees on its investment in that scheme.

Obligations of Collective Investment Management Company 

  1. Every Collective Investment Management Company shall:
  1. be responsible for managing the funds or properties of the scheme on behalf of the unit holders;
  1. take all reasonable steps and exercise due diligence to ensure that the scheme is managed in accordance with the provisions of these regulations, offer document and the trust deed;
  1. exercise due diligence and care in managing assets and funds of the scheme; 
  1. be responsible for the acts of commissions and omissions by its employees or the persons whose services have been availed by it; 
  1. remain liable to the unit holders for its acts of commission or omissions, notwithstanding anything contained in any contract or agreement; 

(f) be incompetent to enter into any transaction with or through its associates, or their relatives relating to the scheme:

Provided that in case the Collective Investment Management Company enters into any transactions relating to the scheme with any of its associates, a report to that effect shall immediately be sent to the trustee and to the Board.

(g) appoint registrar and share transfer agents;

(h) abide by the Code of Conduct as specified in the Third Schedule;

(i) give receipts for all monies received by it and give a report to the Board every month, particularly of receipts and payments; 

(j) hold a meeting of the Board of Directors to consider the affairs of scheme atleast twice in every three months; 

(k) ensure that its officers or employees do not make improper use of their position or information to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the scheme; 

(l) obtain adequate insurance against the property of the scheme; 

(m) comply with such guidelines, directives, circulars and instructions as may be issued by the Board from time to time, on the subject of collective investment schemes.

Submission of information and documents 

15.(1) The Collective Investment Management Company shall prepare quarterly reports (i.e. as at the end of March, June, September and December) on its activities and the position regarding compliance with these regulations and submit the same to the trustees within one month of the expiry of each quarter.
 
 

(2) The Collective Investment Management Company shall file with the trustee and the Board -
 

  1.  particulars of all its directors alongwith their interest in other companies within fifteen days of their appointment; and
  2. any change in the interests of directors, within fifteen days of such change.
  1. The Collective Investment Management Company shall furnish a copy of the Balance Sheet, Profit and Loss Account and a copy of the summary of the yearly appraisal report to the unit holders within two months from the closure of financial year. 

(4) the Collective Investment Management Company shall furnish to the Board and the trustee such information and documents to the Board and the trustee as may be required by them concerning the affairs of the scheme.

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CHAPTER IV

TRUSTEES AND THEIR OBLIGATIONS

Trust Deed to be registered under the Registration Act
 
 
 
 

Appointment of trustees

16.(1) A scheme shall be constituted in the form of a trust and the instrument of trust shall be in the form of a deed duly registered under the provisions of the Indian Registration Act, 1908 (16 of 1908) executed by the Collective Investment Management Company in favour of the trustees named in such an instrument.

(2) A Collective Investment Management Company shall appoint a trustee who shall hold the assets of the scheme for the benefit of unit holders.

Contents of trust deed

17. (1) The trust deed shall contain such clauses as are specified in the Fourth Schedule and such other clauses as are necessary for safeguarding the interests of the unit holders. 

(2) No trust deed shall contain a clause which has the effect of-

(i) limiting or extinguishing the obligations and liabilities of the Collective Investment Management Company in relation to any scheme or the unit holders; or 

(ii) indemnifying the trustee or the Collective Investment Management Company for loss or damage caused to the unit holders by their acts of negligence or acts of commissions or omissions.

Eligibility for appointment as trustee

18.(1) Only persons registered with the Board as Debenture Trustee under Securities and Exchange Board of India (Debenture Trustee) Regulations, 1993 shall be eligible to be appointed as trustees of collective investment scheme.

Provided that no person shall be eligible to be appointed as trustee, if he is directly or indirectly associated with the persons who have control over the collective investment management company.

(2) The Collective Investment Management Company shall furnish to the Board particulars as specified in Form C in 
respect of trustees appointed under sub-regulation (1).

Appointment of trustee not found guilty

19. No person shall be appointed as trustee of a scheme if -

  1. He has been found guilty of an offence under the securities laws or 
  2. The Board or any authority to which the Board has delegated its power has passed against such person, an order under the Act for violation of any provision of the Act or of regulations made hereunder.

Agreement with collective investment management company 
 
 
 
 
 

Rights and obligations of the trustee

 

20.(1) The trustee and the Collective Investment Management Company shall enter into an agreement for managing the scheme property.

(2) The agreement for managing the scheme property shall contain such clauses as are specified in the Fifth Schedule and such other clauses as are necessary for the purpose of fulfilling the objectives of the scheme.

  1. (1) The trustee shall have a right:-

(a) to obtain from the Collective Investment Management Company such information as is considered necessary by the trustee.

(b) to inspect the books of accounts and other records relating to the scheme.

(2) The trustee shall ensure that the Collective Investment Management Company has;-

(a) the necessary office infrastructure;

(b) appointed all key personnel including managers for the schemes and submitted their bio-data which shall contain the educational qualifications and past experience in the areas relevant for fulfilling the objectives of the schemes; 

(c) appointed auditors to audit the accounts of the scheme from the list of auditors approved by the Board;

(d) appointed a compliance officer to comply with the provisions of the Act and these regulations and to redress investor grievances; 

(e) appointed registrars to an issue and share transfer agent;

(f) prepared a compliance manual and designed internal control mechanisms including internal audit systems;

(g)taken adequate insurance for the assets of the scheme;

(h) not given any undue or unfair advantage to any associates of the company or dealt with any of the associates in any manner detrimental to the interest of the unit holders;

(i) operated the scheme in accordance with the provisions of the trust deed, these regulations and the offer document of the scheme(s); 

(j)undertaken the activity of managing schemes only;

(k)taken adequate steps to ensure that the interest of investors of one scheme are not compromised with the object of promoting the interest of investors of any other scheme;

(l)minimum networth on a continuous basis and shall inform the Board immediately of any shortfall;

(m)been diligent in empanelling the marketing agents and in monitoring their activities.

(3) Where the trustee has reason to believe that the conduct of business of the scheme is not in accordance with these regulations, trust deed and the offer document of the scheme, the trustee shall forthwith take such remedial steps as are necessary and shall immediately inform the Board of the action taken. 

(4) The trustee shall be accountable for, and be the custodian of, the funds and property of the respective schemes and shall hold the same in trust for the benefit of the unit holders in accordance with these regulations and the provisions of trust deed. 

(5) The trustee shall be responsible for the calculation of any income due to be paid to the scheme and also for any income received in the scheme to the unit holders. 

(6) The trustee shall convene a meeting of the unit holders - 

(a) whenever required to do so by the Board in the interest of the unit-holders; or

(b) whenever required to do so on the requisition made by unit holders holding at least one-tenth of nominal value of the unit capital of any scheme; or 

  1. when any change in the fundamental attributes of any scheme which affects the interest of the unit holders is proposed to be carried out.

Provided that no such change shall be carried out unless the consent of unit holders holding at least three-fourths of nominal value of the unit capital of the scheme is obtained.

Explanation:- For the purposes of this clause "fundamental attributes" means the investment objective and terms of a scheme.

(7) The trustee shall review:

  1. on a quarterly basis (i.e. by the end of March, June, September and December) every year all activities carried out by the Collective Investment Management Company.

(b) periodically all service contracts relating to registrars to an issue and share transfer agents and satisfy itself that such contracts are fair and reasonable in the interest of the unit holders.

(c) investor complaints received and the redressal of the same by the Collective Investment Management Company.
 

  1. (i) The trustee shall ensure that:-
  1. net worth of Collective Investment Management Company is not deployed in a manner which is detrimental to interest of unitholders.
  2. Property of each scheme is clearly identifiable as scheme property and held separately from property of the Collective Investment Management Company and property of any other scheme.
  3. Clearances or no objection certificate is obtained, in respect of transactions relating to property of the scheme from such authority as is competent to grant such clearance or no objection certificate.

(ii) The trustee shall abide by the Code of Conduct as specified in the Third Schedule.

(9) The trustee shall furnish to the Board on a quarterly basis (i.e. by end of March, June, September and December), every year -

(a) a report on the activities of the scheme;

(b) a certificate stating that the trustee has satisfied himself that affairs of the Collective Investment Management Company and of the various schemes are conducted in accordance with these regulations and investment objective of each scheme. 

  1. The trustee shall cause:-

(a) the profit and loss accounts and balance sheet of the schemes to be audited at the end of each financial year by an auditor empanelled with the Board.

(b) each scheme to be appraised at the end of each financial year by an appraising agency.

  1. Scheme rated by a credit rating agency. 

(11) A meeting of the trustees to discuss the affairs of the scheme shall be held at least twice in every three months in a financial year. 

(12) The trustee shall report to the Board any breach of these regulations and has had, or is likely to have, a materially adverse effect on the interests of unit holders as soon as they become aware of the breach.

(13) The trustee shall ensure that - 

(a) the fees and expenses of the scheme are within the limits as specified in Part-I of the Ninth Schedule;

(b) accounts of the schemes are drawn up in accordance with the accounting norms as specified in Part-II of the Ninth Schedule.

(c) accounts of the scheme comply with the format of the balance sheet and the profit and loss account as specified in Part-III of the Ninth Schedule. 

Termination of trusteeship

22.(1) The trusteeship of a trustee shall come to an end -

  1. If the trustee ceases to be trustee under the Securities and Exchange Board of India (Debentures Trustees) Regulations, 1993; or 
  2. if the trustee is in the course of being wound up; or
  3. if unit holders holding at least three-fourths of the nominal value of the unit capital of the scheme pass a resolution for removing the trustee and the Board approves such resolution; or 
  4. if in the interest of the unit holders, the Board, for reasons to be recorded in writing decides to remove the trustee for any violation of the Act or these regulations committed by them; or
     

 

Provided that the trustee shall be afforded reasonable opportunity of hearing before action is taken under this clause; 

  1. if the trustee serves on the Collective Investment Management Company a notice of not less than three months expressing its intention not to continue as trustee.
  1. On termination of the trusteeship under sub-regulation (1), another trustee, eligible to be appointed under regulation 18, shall be appointed by the Collective Investment Management Company. 
  2. The appointment of the new trustee under sub-regulation (2), shall be completed within three months from the date the previous trusteeship came to an end.

(4) The Board may notwithstanding anything contained in regulation 18 appoint any person as a trustee if the Collective Investment Management Company fails to appoint a trustee under sub-regulations (2) and (3). 

(5) The trustee appointed under sub-regulation (3) and (4) shall stand substituted as a trustee in all the documents to which the trustee so removed was a party.

(6) The person appointed by the Board shall apply to the Court for an order directing the Collective Investment Management Company to wind up the scheme. 

(7) A trust deed in the form as specified under regulation 16 shall be executed by the Collective Investment Management Company in favour of the trustee so appointed and from the date of such appointment, trustees shall be subject to all the rights and duties as specified in the regulations. 

(8) The trustee so removed shall from such date be discharged from complying with the obligations under the trust deed but shall remain liable for any action taken by them before such removal. 

Termination of the Agreement with the Collective Investment Management Company

23.(1) The agreement referred to in regulation 20 entered into by the trustee with the Collective Investment Management Company may be terminated -

(a) if the Collective Investment Management Company is in the course of being wound up as per the provisions of the Companies Act, 1956 or;

(b) if unit holders holding at least three-fourths of the nominal value of the unit capital of the scheme pass a resolution for terminating the agreement with the Collective Investment Management Company and the prior approval of the Board has been obtained, or

(c) if in the interest of the unit holders the Board or the trustee, after obtaining prior approval of the Board, and after giving an opportunity of being heard to the Collective Investment Management Company, decide to terminate the agreement with the Collective Investment Management Company.

(2) Upon termination of agreement under sub-regulation (1), another Collective Investment Management Company, registered with the Board, shall be appointed by the trustee within three months from the date of such termination. 
 

  1. The Collective Investment Management Company so removed shall continue to act as such at the discretion of trustee or the trustee itself may act as Collective Investment Management Company till such time as new Collective Investment Management Company is appointed.

(4) The Collective Investment Management Company appointed under sub-regulation (2) shall stand substituted as a party in all the documents to which the Collective Investment Management Company so removed was a party.

(5) The Collective Investment Management Company so removed shall continue to be liable for all acts of omission and commissions notwithstanding such termination. 

(6) If, none of the Collective Investment Management Company, registered under these regulations, consent to be appointed as Collective Investment Management Company within a further period of three months, then the trustee may wind up the scheme. 

(7) An agreement for managing scheme property shall be executed in favour of the new Collective Investment Management Company subject to all the rights and duties as specified in the regulations.

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CHAPTER V

SCHEMES OF COLLECTIVE INVESTMENT MANAGEMENT COMPANY 

Procedure for launching of schemes
 

Rating
 
 
 

Appraisal
 

Close-ended scheme and Scheme duration 
 
 
 

Insurance

 

24.(1) No scheme shall be launched by the Collective Investment Management Company unless such scheme is approved by the Trustee.

(2) No scheme shall be launched by the Collective Investment Management Company without obtaining rating from a credit rating agency.

(3) No scheme shall be launched by the Collective Investment Management Company without getting the scheme appraised by an appraising agency. 

  1. Collective Investment Management Company shall:-
  1. Launch only close ended schemes;
  2. the duration of the schemes shall not be of less than three calendar years.

(5) Collective Investment Management Company shall obtain adequate insurance policy for protection of the scheme property. 

No Guaranteed returns

25. No scheme shall provide guaranteed or assured returns.

Provided that indicative return may be indicated in the offer document only, if the same is assessed by the appraising agency and expressed in monetary terms.

Disclosures in the offer document

26.(1) The Collective Investment Management Company shall before launching any scheme file a copy of the offer document of the scheme as referred to in sub-regulation (1) of regulation 24 with the Board and pay filing fees as specified in the Second Schedule.

(2) The offer document shall contain such information as specified in the Sixth Schedule. 

(3) The offer document shall also contain true and fair view of the scheme and adequate disclosures to enable the investors to make informed decision. 

(4) The Board may in the interest of investors require the Collective Investment Management Company to carry out such modifications in the offer document as it deems fit. 

(5) In case no modifications are suggested by the Board in the offer document within 21 days from the date of filing, the Collective Investment Management Company may issue the offer document to public.

Advertisement material

27. (1) Advertisements in respect of every scheme shall be in conformity with the Advertisement Code as specified in the Seventh Schedule.

(2) The advertisement for each scheme shall disclose in addition to the investment objectives, the method and periodicity of valuation of scheme property.

Appraising Agency

28. The appraising agency whose appraisal report forms part of the offer document and has given a written consent for the inclusion of the appraisal report in the offer document shall be liable for any statement in the appraisal report which is misleading, incorrect or false.

Misleading Statements

29.(1) The offer document and advertisement materials shall not be misleading or contain any statement or opinion which are incorrect or false.
 

  1. Where an offer document or advertisement includes any statement or opinion which are incorrect or false or misleading, every person - 

(i)who is a director of the Collective Investment Management Company at the time of the issue of the offer document;

(ii) who has issued the offer document and shall be punishable under the Act unless he proves either that the statement or opinion was immaterial or that he had reasonable ground to believe at the time of the issue of the offer document or advertisement that the statement was true. 

Offer Period

30. No scheme shall be open for subscription for more than 90 days.

Allotment of Units and refunds of moneys

31.(1) The Collective Investment Management