SECURITIES
AND EXCHANGE BOARD OF INDIA (COLLECTIVE INVESTMENT SCHEMES) REGULATIONS, 1999
[AMENDED UPTO 2023]
PREAMBLE
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:
CHAPTER I PRELIMINARY
Regulation - 1.Short title and commencement.
(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.
Regulation - 2. Definitions.
(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:
(i)
notices,
brochures, pamphlets, circulars, show cards, catalogues, hoardings, placards,
posters, insertions in newspapers, pictures, films and cover pages of offer
documents;
(ii)
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 [collective investment 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 Management 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 firm, including a
limited liability partnership, constituted under the Limited Liability
Partnership Act, 2008, who is eligible and qualified to audit the accounts of a
company under section 141 of the Companies Act, 2013 (18 of 2013).]
[(ea) "designated employees" of the
Collective Investment Management Company includes:
(i)
chief
executive officer, chief investment officer, chief risk officer, chief
information security officer, chief operation officer, fund manager, compliance
officer, sales head, investor relation officer, heads of other departments
and dealer of the Collective Investment Management Company;
(ii)
persons
directly reporting to the chief executive officer (excluding personal
assistant/secretary);
(iii)
fund
management team and research team;
(iv)
other
employees as identified by Collective Investment Management Companies or
trustees.]
(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) [or the Companies Act, 2013 (18 of 2013)] 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 [collective investment scheme]" means
any [collective investment scheme] launched by a
Collective Investment Management Company, in which the period of maturity of
the [collective investment scheme] is specified and
there is no provision for re-purchase before the expiry of the maturity of
the [collective investment scheme];
(k) "control" or "controlling interest"
means control exercised or controlling interest held:
[(i) in the case of a company, by any person
individually or together with persons acting in concert, who directly or
indirectly own, control or hold shares carrying not less than ten percent of the
voting rights of such company; or
(ii) as between two companies, if the same person
either individually or together with persons acting in concert, directly or
indirectly, own, control or hold shares carrying not less than ten percent of
the voting rights of each of the two companies; or]
(iii) [By] 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) [****]
(o) "form" means any of the forms
specified as such in the First Schedule;
[(p) "fraud" means a fraud as defined in
sub-clause (c) of sub-regulation (1) of regulation 2 of the Securities and
Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices
relating to Securities Market) Regulations, 2003;]
(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 [collective investment scheme] are invited from the
public;
(u) "regulation" means a regulation
forming part of these regulations;
[(v) "relative" means a person as defined
in section 2(77) of the Companies Act, 2013 (18 of 2013).]
(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) [***]
(z) "[collective investment scheme] property"
includes:
(i)
subscription
of moneys or money's worth (including bank deposits) to the [collective investment 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 the Act,
the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the
Depositories Act, 1996 (22 of 1996), the provisions of any other law to the
extent it is administered by the Board and the relevant rules and regulations
made thereunder;]
(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 [collective investment 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 [collective investment scheme].
(2) [In these regulations the expression collective
investment scheme shall have the same meaning as assigned to it under Section
11AA of the Act.]
[(3) The words and expressions used and not defined
in these regulations but defined in the Act, the Securities Contracts
(Regulation) Act, 1956 (42 of 1956), the Companies Act, 2013 (18 of 2013), the
Depositories Act, 1996 (22 of 1996), or any rules or regulations made
thereunder shall have the same meanings respectively assigned to them in those
acts, rules or regulations made thereunder or any statutory modification or
re-enactment thereto, as the case may be.]
CHAPTER II REGISTRATION OF COLLECTIVE INVESTMENT
MANAGEMENT COMPANY
Regulation - 3. No person other than Collective Investment Management Company to launch scheme.
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.
Regulation - 4. Application for grant of certificate.
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.
Regulation - [4A. Application by a scheme or arrangement deemed to be a collective investment scheme
(1)
Any
person proposing to carry on or sponsor or launch any scheme or arrangement
which would be deemed to be a collective investment scheme under the proviso to
sub-section (1) of section 11AA of the Act, shall make an application for grant
of registration as a Collective Investment Management Company in Form A:
Provided
that any scheme or arrangement which is otherwise regulated or prohibited under
any other law shall not be deemed to be a collective investment scheme.
(2)
All
other provisions of these regulations and the guidelines and circulars issued
thereunder, shall apply to any scheme or arrangement deemed to be a collective
investment scheme under the proviso to sub-section (1) of section 11AA of the
Act.]
Regulation - 5. Application by existing Collective Investment Schemes.
(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.
Regulation - 6. Application fee to accompany the application.
Every
application for registration under regulation 4 shall be accompanied by a
non-refundable application fee as specified in the Second Schedule.
Regulation - 7. Application to conform to the requirements.
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.
Regulation - 8. Furnishing information.
(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.
Regulation - 9. Conditions for eligibility.
The
Board shall not consider an application for the grant of a certificate unless
the applicant satisfies the following conditions, namely:
(a)
the
applicant is set up and registered as a company under the Companies Act, 1956;
(b)
the
applicant has, in its Memorandum of Association specified the managing of
collective investment scheme as one of its main objects;
[(c) the applicant or its promoters should have a
sound track record and general reputation of fairness and integrity in all
their business transactions.
Explanation. For
the purposes of this clause "sound track record" shall mean that,
(i)
the
applicant or its promoter should be carrying on business in financial services
or in the relevant field, in which collective investment schemes are proposed
to be launched, for a period of not less than five years;
(ii)
the
networth of applicant or its promoter is positive in all the immediately
preceding five years;
(iii)
the
applicant or its promoter has profits after providing for depreciation,
interest and tax in three out of the immediately preceding five years,
including the fifth year; and
(iv)
the
applicant has a net worth of not less than rupees fifty crores on a continuous
basis:
Provided
that the applicant shall have a networth not less than rupees hundred crore
till it has profits for five consecutive years in case the requirements under
sub-clause (iii) of clause (c) of this regulation is not fulfilled;]
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.
(d) the applicant is a fit and proper person for
the grant of such certificate;
(e) the applicant has adequate infrastructure to
enable it to operate collective investment scheme in accordance with the
provision of these regulations;
(f) 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.
(i) 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.
(k) in case the applicant is an existing collective
investment scheme, it complies with the provisions of Chapter IX of these
regulations.
Regulation - 9A. [Criteria for fit and proper person.
For
the purpose of determining whether an applicant or the collective investment
management company is a fit and proper person, the Board may take into account
the criteria specified in Schedule II of the Securities and Exchange Board of
India (Intermediaries) Regulations, 2008.]
Regulation - [9B.
(1)
No
Collective Investment Management Company or a promoter of a Collective
Investment Management Company, their associates or group companies, through the
schemes of the Collective Investment Management Company or otherwise,
individually or collectively, directly or indirectly, have-
(a)
ten
percent or more of the shareholding or voting rights in the Collective
Investment Management Company or the trustee company of any other Collective
Investment Management Company; or
(b)
representation
on the board of the Collective Investment Management Company or the trustee
company of any other Collective Investment Management Company.
(2)
Any
shareholder holding ten percent or more of the shareholding or voting rights in
the Collective Investment Management Company or the trustee company of a
Collective Investment Management Company, shall not have, directly or
indirectly,
(a)
ten
percent or more of the shareholding or voting rights in the Collective
Investment Management Company or the trustee company of any other Collective
Investment Management Company; or
(b)
representation
on the board of the Collective Investment Management Company or the trustee
company of any other Collective Investment Management Company:
Provided
that in the event of a merger, acquisition, scheme of arrangement or any other
arrangement involving the promoters of the Collective Investment Management
Company, shareholders of the Collective Investment Management Company or
trustee companies, their associates or group companies which results in the
incidental acquisition of shares, voting rights or representation on the board
of the Collective Investment Management Company or trustee companies, this
regulation shall be complied with within a period of one year of coming into
force of such an arrangement.]
Regulation - 10. Grant of certificate.
(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.
Regulation - 11. Terms and conditions to be complied with.
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 [twenty-one calendar days] from the date of receipt
of the complaint from the aggrieved investor.
[(g) the Collective Investment Management Company
shall enter into an agreement with a depository for dematerialization of the units
of collective investment scheme proposed to be issued;
(h) all monies payable towards subscription of
units of collective investment scheme shall be paid through cheque or demand
draft or through any other banking channel, but not by cash;
(i) the Collective Investment Management Company
shall comply with KYC (know your client) norms as specified by the Board.]
Regulation - 12.Procedure where registration is not granted.
(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.
CHAPTER III BUSINESS ACTIVITIES AND OBLIGATIONS OF
COLLECTIVE INVESTMENT MANAGEMENT COMPANY
Regulation - 13. Restrictions on business activities.
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;
(c)
launch
any scheme for the purpose of investing in securities;
(d)
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.
Regulation - 14. Obligations of Collective Investment Management Company.
Every
Collective Investment Management Company shall:
(a)
be
responsible for managing the funds or properties of the scheme on behalf of the
unit holders;
(b)
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;
(c)
exercise
due diligence and care in managing assets and funds of the scheme;
(d)
be
responsible for the acts of commissions and omissions by its employees or the
persons whose services have been availed by it;
(e)
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 [;]
[(n) the Collective Investment Management Company
and its designated employees shall invest such amounts in such schemes of the
Collective Investment Management Company, as may be specified by the Board from
time to time.]
Regulation - [14A. Dispute Resolution.
All
claims, differences or disputes between the Collective Investment Management
Company and investors arising out of or in relation to the activities of the
Collective Investment Management Company in the securities market shall be
submitted to a resolution mechanism that includes mediation and/or conciliation
and/or arbitration, in accordance with the procedure specified by the Board.]
Regulation - [14B. Grievance Redressal Mechanism.
(1)
The
Collective Investment Management Company shall redress investor grievances
promptly but not later than twenty-one calendar days from the date of receipt
of the grievance and in such manner as may be specified by the Board.
(2)
The
Board may also recognize a body corporate for handling and monitoring the
process of grievance redressal within such time and in such manner as may be
specified.]
Regulation - 15. Submission of information and documents.
(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.
(a)
particulars
of all its directors alongwith their interest in other companies within fifteen
days of their appointment; and
(b)
any
change in the interests of directors, within fifteen days of such change.
(3)
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.
CHAPTER IV TRUSTEES AND THEIR OBLIGATIONS
Regulation - 16. Trust Deed to be registered under the Registration Act.
(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)
Appointment
of trustees. A Collective Investment Management Company shall appoint a trustee
who shall hold the assets of the scheme for the benefit of unit holders.
Regulation - 17. Contents of trust deed.
(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.
Regulation - 18. Eligibility for appointment as trustee.
(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).
Regulation - 19. Appointment of trustee not found guilty.
No
person shall be appointed as trustee of a scheme if -
(a)
He
has been found guilty of an offence under the securities laws or
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.
Regulation - 20. Agreement with collective investment management company.
(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.
Regulation - 21.Rights and obligations of the trustee.
(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
(c)
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:
(a)
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.
(8)
(i)
The trustee shall ensure that:-
(a)
net
worth of Collective Investment Management Company is not deployed in a manner
which is detrimental to interest of unit holders.
(b)
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.
(c)
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.
(10)
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.
(c)
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.
Regulation - 22. Termination of trusteeship.
(1)
The
trusteeship of a trustee shall come to an end -
(a)
If
the trustee ceases to be trustee under the Securities and Exchange Board of
India (Debentures Trustees) Regulations, 1993; or
(b)
if
the trustee is in the course of being wound up; or
(c)
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
(d)
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;
(e)
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.
(2)
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.
(3)
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.
Regulation - 23. Termination of the Agreement with the Collective Investment Management Company.
(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.
(3)
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.
CHAPTER V SCHEMES OF COLLECTIVE INVESTMENT
MANAGEMENT COMPANY
Regulation - 24. Procedure for launching of schemes.
(1)
No
scheme shall be launched by the Collective Investment Management Company unless
such scheme is approved by the Trustee.
(2)
Rating.
No scheme shall be launched by the Collective Investment Management Company
without obtaining rating from a credit rating agency.
(3)
Appraisal.
No scheme shall be launched by the Collective Investment Management Company
without getting the scheme appraised by an appraising agency.
(4)
Close
ended scheme and Scheme duration. Collective Investment Management Company
shall:
(a)
Launch
only close ended schemes;
(b)
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.
[Closure of subscription list
(6)
Each
collective investment scheme shall immediately after the closure of the
subscription list comply with the following conditions, namely,-
(a)
minimum
subscription amount of rupees twenty crore;
(b)
minimum
twenty investors; and
(c)
no
person shall hold more than twenty-five percent of the assets under management
of scheme:
Provided
that where the collective investment scheme fails to comply with this
sub-regulation, Collective Investment Management Company shall be liable to
refund the application money to the applicants.]
Regulation - 25. No Guaranteed returns.
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.
Regulation - 26. Disclosures in the offer document.
(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.
Regulation - 27. Advertisement material.
(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.
Regulation - 28. Appraising Agency.
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.
Regulation - 29. Misleading Statements.
(1)
The
offer document and advertisement materials shall not be misleading or contain
any statement or opinion which are incorrect or false.
(2)
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.
Regulation - [30. Offer period
No
collective investment scheme shall be open for subscription for more than
fifteen days:
Provided
that collective investment scheme may be kept open for subscription for a
maximum of another fifteen days subject to issuance of public notice by the
Collective Investment Management Company before the expiry of initial fifteen
days.]
Regulation - 31. Allotment of Units and refunds of moneys.
(1)
The
Collective Investment Management Company shall specify in the offer document,
(a)
the
minimum and the maximum subscription amount it seeks to raise under the scheme;
and
(b)
in
case of oversubscription the process of allotment of the amount oversubscribed.
(2)
The
Collective Investment Management Company shall refund the application money to
the applicants,
(i)
if
the scheme fails to receive the minimum subscription amount referred to in
clause (a) of sub-regulation (1).
[(3) Any amount refundable under sub-regulation (2)
or proviso to sub-regulation (6) of regulation 24, shall be refunded within a
period of five working days from the date of closure of subscription list, by
cheque or demand draft marked "A/C Payee" through Registered A.D. or
speed post, courier etc., or payment channels such as RTGS, NEFT, IMPS, direct
credit, etc. or any other mode allowed by the Reserve Bank of India from time
to time, to the applicants.]
(4) In the event of failure to refund the amounts
within the period specified in sub-regulation (3), the Collective Investment
Management Company shall pay interest to the applicants at a rate of fifteen
percent per annum on the expiry of [five working days] from the date of closure of the
subscription list.
Regulation - 32. Unit certificates.
The
Collective Investment Management Company shall issue to the applicant whose
application has been accepted, [the units only in dematerialized form within a
period of five working days] from the date of closure of the subscription
list [.]
[****]
Regulation - 33. Transfer of units.
(1)
A
unit certificate issued under the scheme shall be freely transferable.
(2)
The
Collective Investment Management Company shall, on production of instrument of
transfer together with relevant unit certificates, register the transfer and
return the unit certificate to the transferee within thirty days from the date
of such production.
Provided
that if the units are held in a depository such units shall be transferable in
accordance with the provisions of the Securities and Exchange Board of India
(Depositories and Participants) Regulations, 1996 and the bye-laws of the
depository.
Regulation - 34. Money to be kept in separate account and utilisation of money.
(1)
The
subscription amount received shall be kept in a separate bank account in the
name of the scheme and shall be utilised for-
(a)
adjustment
against allotment of units only after the trustee has received a statement from
the registrars to the issue and share transfer agent regarding minimum
subscription amount, as stated in the offer document, having been received from
the public, or
(b)
for
refund of money in case minimum subscription amount, as stated in the offer
document, has not been received or in case of over-subscription.
(2)
The
minimum subscription amount as specified in the offer document shall not be
less than the minimum amount, as specified by the appraising agency, needed for
completion of the project for which the scheme is being launched.
(3)
The
moneys credited to the account of the scheme shall be utilised for the purposes
of the scheme and as specified in the offer document.
(4)
Any
unutilised amount lying in the account of the scheme shall be invested in the
manner as disclosed in the offer document.
Regulation - 35. Investments and segregation of funds.
The
Collective Investment Management Company shall:
(a)
not
invest the funds of the scheme for purposes other than the objective of the
scheme as disclosed in the offer document.
(b)
segregate
the scheme assets of different schemes.
(c)
not
invest corpus of a scheme in other schemes.
(d)
not
transfer funds from one scheme to another scheme.
[(e) not invest more than twenty five percent of
the amount raised by Collective Investment Management Company in projects owned
directly or indirectly by Collective Investment Management Company.]
Provided
that inter scheme transfer of scheme property may be permitted at the time of termination
of the scheme with prior approval of the trustee and the Board.
Regulation - 36. Listing of schemes.
The
units of every scheme shall be listed immediately after the date of allotment
of units and not later than six weeks from the date of closure of the scheme on
each of the stock exchanges as mentioned in the offer document.
Regulation - 37. Winding up of scheme.
(1)
A
scheme shall be wound up on the expiry of duration specified in the scheme or
on the accomplishment of the purpose of the scheme.
(2)
Notwithstanding
anything contained in sub-regulation (1), a scheme may also be wound up -
(a)
on
the happening of any event which, in the opinion of the trustee, requires the
scheme to be wound up and the prior approval of the Board is obtained; or
(b)
if
unit holders of a scheme holding at least three-fourth of the nominal value of
the unit capital of the scheme pass a resolution that the scheme be wound up
and the approval of the Board is obtained; or
(c)
if
in the opinion of the Board, the continuance of the scheme is prejudicial to
the interests of the unit-holders; or
(d)
if
in the opinion of the Collective Investment Management Company, the purpose of
the scheme can not be accomplished and it obtains the approval of the trustees
and also of the unit holders of the scheme holding atleast ¾ of the nominal
value of the unit capital of the scheme with a resolution that the scheme be
wound up and the approval of the Board is obtained.
(3)
Where
a scheme is to be wound up under sub-regulation (1) or sub-regulation (2), the
trustee shall give notice disclosing the circumstances leading to the winding
up of the scheme in a daily newspaper having nation wide circulation and in the
newspaper published in the language of the region where the Collective
Investment Management Company is registered.
(4)
(a)
The trustee shall dispose of the assets of the scheme concerned in the best
interest of the unit holders of that scheme.
(b) The proceeds of sale realised under clause(a),
shall be first utilised towards the discharge of such liabilities as are due
and payable under the scheme and after making appropriate provision for meeting
the expenses connected with such winding up, the balance shall be paid to the
unit holders in proportion to their unit holding.
(5)
On
the completion of the winding up, the trustee shall forward to the Board and
the unit holders:
(a)
a
report on the steps taken for realisation of assets of the scheme, expenses for
winding up and net assets available for distribution to the unit holders and
(b)
a
certificate from the auditors of the scheme to the effect that all the assets
of the scheme are realised and the details of the distribution of the
proceeds.
(6)
The
unclaimed money if any at the time of winding up shall be kept separately in a
bank account by the trustee for a period of three years for the purpose of
meeting investors' claims and thereafter shall be transferred to investor
protection fund, as may be specified by the Board.
Regulation - 38. Effect of commencement of winding up proceedings.
On
and from the date of the publication of notice under sub-regulation (3) of
regulation 37, the trustee or the Collective Investment Management Company as
the case may be, shall cease to carry on any business activities in respect of
the scheme so wound up.
Regulation - 39. Cessation of the scheme.
If,
after the receipt of the report under sub-regulation (5) of regulation 37, the
Board is satisfied that all the measures for winding up of the scheme have been
complied with, the scheme shall cease to exist.
CHAPTER VI GENERAL OBLIGATIONS
Regulation - 40. To maintain proper books of accounts and records, etc.
(1)
Every
Collective Investment Management Company shall -
(a)
keep
and maintain proper books of accounts, records and documents, for each scheme
so as to explain its transactions and to disclose at any point of time the
financial position of each scheme and in particular give a true and fair view
of the state of affairs of the scheme and
(b)
intimate
to the Board and the trustees the place where such books of accounts, records
and documents including computer records are maintained.
(2)
Every
Collective Investment Management Company shall continue to maintain and
preserve, for a period of five years after the close of each scheme, its books
of accounts, records, computer data and documents.
Regulation - 41. Financial year.
The
financial year for all the schemes shall end as of March 31 of each year.
Regulation - 42. Despatch of warrants and proceeds.
The
Collective Investment Management Company shall,
(a)
Despatch
to the unit holders the warrants within 42 days of the declaration of the
interim returns.
(b)
Despatch
the redemption proceeds within 30 days of the closure or the winding up of the
scheme.
Regulation - 43. Statement of Accounts and Annual Report.
(1)
The
Collective Investment Management Company shall:
(a)
not
exceed the ceilings on expenses or fees in respect of the scheme as specified
in Part-I of the Ninth Schedule.
(b)
prepare
the accounts of the scheme in accordance with accounting norms as specified in
Part-II of the Ninth Schedule;
(c)
comply
with format of balance sheet and profit and loss accounts as specified in
Part-III of the Ninth Schedule;
(2)
An
annual report and annual statement of accounts of each scheme shall be prepared
in respect of each financial year.
(3)
Every
Collective Investment Management Company shall within two months from the date
of closure of each financial year forward to the Board a copy of the Annual
Report.
Regulation - 44. Auditor's Report.
(1)
Every
scheme shall have the annual statement of accounts audited by an auditor who is
empanelled with the Board and who is not in any way associated with the auditor
of the Collective Investment Management Company.
(2)
The
auditor shall be appointed by the trustee.
(3)
The
auditor shall forward his report to the trustee and such report shall form part
of the Annual Report of the scheme.
(4)
The
auditor's report shall comprise the following:
(a)
a
certificate to the effect that:
(i)
he
has obtained all information and explanations which, to the best of his
knowledge and belief, were necessary for the purpose of the audit;
(ii)
the
balance sheet and the revenue account give a fair and true view of the scheme,
state of affairs and surplus or deficit in the scheme for the accounting period
to which the Balance Sheet or, as the case may be the Revenue Account relates;
(iii)
the
statement of account has been prepared in accordance with accounting policies
and standards as specified in the Part II of the Ninth Schedule.
(iv)
any
other matter which in the opinion of the auditor is vital and has a bearing on
the schemes.
Regulation - 45. Functions of auditors of scheme.
(1)
The
auditor of the scheme shall, as soon as possible, notify the Board and the
trustee in writing if he has reasonable grounds to suspect that a contravention
of the regulations has occurred or if the schemes are not conducted on sound
commercial principles.
(2)
The
auditor of the scheme:
(a)
shall
have a right of access at all reasonable times to the books of the scheme; and
(b)
may
require any employee of the Collective Investment Management Company to give
the auditor information and explanations for the purposes of the audit.
Regulation - 46. Removal or Resignation of auditors.
(1)
The
trustee, after prior approval of the trustee and for reasons to be recorded in
writing remove the auditor of the scheme for misconduct or inefficiency after
giving the auditor a reasonable opportunity of hearing.
Provided
that another auditor for the scheme is appointed by trustee immediately from
auditors empanelled with the Board.
(2)
The
auditor of the scheme may resign by giving a three months written notice to the
Collective Investment Management Company and to the trustee.
Regulation - 47. Publication of Annual Report and summary thereof.
(1)
The
scheme wise annual report or an abridged form thereof shall be published in a
national daily as soon as possible but not later than two calendar months from
the date of finalisation of accounts.
(2)
The
annual report shall contain details as specified in the Ninth Schedule and such
other details as are necessary for the purpose of providing a true and fair
view of the operations of the collective investment scheme.
(3)
The
report if published in abridged form shall carry a note that full annual report
shall be available for inspection at the Head Office and all branch offices of
the Collective Investment Management Company.
Regulation - 48. Periodic and continual disclosures.
(1)
The
Collective Investment Management Company and the trustee, shall make such
disclosures or submit such documents as they may be called upon by the Board to
make or submit.
(2)
Without
prejudice to the generality of sub-regulation (1), the Collective Investment
Management Company on behalf of the scheme shall furnish the following periodic
reports to the Board, namely:
(a)
copies
of the duly audited annual statements of accounts including the balance sheet
and the profit and loss account in respect of each scheme, once a year;
(b)
a
copy of quarterly unaudited accounts;
(c)
a
quarterly statement of changes in net assets for each of the schemes.
Regulation - 49. Quarterly disclosures.
A
Collective Investment Management Company, on behalf of the scheme shall before
the expiry of one month from the close of each quarter that is 31st March, 30th
June, 30th September and 31st December publish its unaudited financial results
in one daily newspaper having nation wide circulation and in a newspaper
published in the language of the region where the Head Office of the Collective
Investment Management Company is situated.
Provided
that the quarterly unaudited report referred in this sub-regulation shall
contain details as specified in the regulations and such other details as are
necessary for the purpose of providing a true and fair view of the operations
of the scheme.
Regulation - 50. Disclosures to the investors.
The
trustee shall ensure that the Collective Investment Management Company shall
make such disclosures to the unit holders as are essential in order to keep
them informed about any matter which may have an adverse bearing on their
investments.
Regulation - 51. Calling of meeting of unit holders, transfer and transmission of units.
The
calling of meeting of unit holders as well as transfer and transmission of
units of scheme shall be as per the provisions of the Eighth Schedule.
CHAPTER VII INSPECTION AND AUDIT
Regulation - 52. Board's right to inspect and investigate.
(1)
The
Board may appoint one or more persons as inspecting officer to undertake the
inspection of the books of accounts, records, documents and infrastructure,
systems and procedures or to investigate the affairs of the trustee and
Collective Investment Management Company for any of the following purposes,
namely:
(a)
to
ensure that the books of accounts are being maintained by the Collective
Investment Management Company in the manner specified in these regulations;
(b)
to
ascertain whether the provisions of the Act and these regulations are being
complied with by the trustee and Collective Investment Management Company;
(c)
to
ascertain whether the systems, procedures and safeguards followed by the
Collective Investment Management Company are adequate;
(d)
to
investigate into the complaints received from the investors or any other person
on any matter having a bearing on the activities of the trustee and Collective
Investment Management Company;
Regulation - 53. Notice before inspection and investigation.
(1)
Before
ordering an inspection under regulation 52 the Board shall give not less than
ten days notice to the Collective Investment Management Company or trustee as
the case may be.
(2)
Notwithstanding
anything contained in sub-regulation (1), where the Board is satisfied that in
the interest of the investors no such notice is required to be given, it may,
by an order in writing direct that such inspection or investigation be taken up
immediately without any notice.
(3)
During
the course of inspection or investigation, the trustee or Collective Investment
Management Company against whom the inspection or investigation is being
carried out shall be bound to discharge his obligations as provided in
regulation 54.
Regulation - 54. Obligations during inspection and investigation.
(1)
It
shall be the duty of the trustee or Collective Investment Management Company
whose affairs are being inspected or investigated, and of every director,
officer and employee thereof, to produce such books, accounts, records, and
other documents in its custody or control and furnish him such statements and
information relating to the activities as trustee or Collective Investment
Management Company, as the inspecting officer may require, within such
reasonable period as the inspecting officer may specify.
(2)
The
trustee or Collective Investment Management Company shall allow the inspecting
officer to have a reasonable access to the premises occupied by it or by any
other person on its behalf and also provide necessary infrastructure for
examining any books, records, documents, and computer data in the possession of
the trustee and Collective Investment Management Company or such other person
and also provide copies of documents or other materials which in the opinion of
the inspecting officer are relevant for the purpose of the inspection.
Regulation - 55. Submission of report to the Board.
The
inspecting officer shall, on completion of the inspection or investigation,
submit a report to the Board:
Provided
that if directed to do so by the Board, he shall submit interim reports also.
Regulation - 56.[Action on inspection or investigation report.
The
Board or the Chairman shall after consideration of inspection or investigation
report take such action as the Board or Chairman may deem fit and appropriate
including action under the Securities and Exchange Board of India (Procedure
for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations,2002.]
Regulation - 57. Appointment of Auditor and recovery of expenses.
(1)
Without
prejudice to the provisions of regulation 52, the Board shall have the power to
appoint an auditor to inspect or investigate, as the case may be, into the
books of accounts or the affairs of the trustee or Collective Investment
Management Company in respect of schemes:
Provided
that the Auditor so appointed shall have the same powers of the inspecting
officer as stated in regulation 52 and the obligation of the Collective
Investment Management Company or trustee and their respective employees in
regulation 54, shall be applicable to the inspection under this regulation.
(2)
Payment
of inspection fees to the Board. The Board shall be entitled to recover such
expenses including fees paid to the auditors as may be incurred by it for the
purposes of inspecting the books of accounts, records and documents of the
trustee or Collective Investment Management Company.
CHAPTER
VIII PROCEDURE FOR ACTION IN CASE OF DEFAULT
Regulation - 58.
[***]
Regulation - 59. Liability for action in case of default.
In case a Collective Investment
Management Company:
(a) contravenes
any provision of the Act or these regulations;
(b) for the
purposes of these regulations furnishes any information which is false or
misleading or suppresses any material information;
(c) does not
co-operate in any inspection, investigation or inquiry conducted by the Board
under the Act or these regulations;
(d) fails to
comply with any directions issued by the Board under the Act or the
regulations;
(e) fails to
resolve the complaints of the investors or fails to furnish to the Board a
satisfactory reply in this behalf when called upon to do so by the Board;
(f) commits a
breach of any provision of the Code of Conduct specified in the Third Schedule;
(g) fails to
pay the fees specified in the Second Schedule;
(h) commits a
breach of the conditions of registration; or
(i) fails to
make an application for listing or fails to list units of a [collective
investment scheme] in a recognized stock exchange, shall be dealt with in the
manner provided in [Chapter V
of the Securities and Exchange Board of India (Intermediaries) Regulations,
2008].
Regulation - 60.
[***]
Regulation - 61.
[***]
Regulation - 62.
[***]
Regulation - 63.
[***]
Regulation - 64.
[***]
Regulation - 65. Directions by the Board.
The Board may, in the interests of the
securities market and the investors and without prejudice to its right to initiate
action under this Chapter, including initiation of criminal prosecution under
section 24 of the Act, give such directions as it deems fit in order to ensure
effective observance of these regulations, including directions:
(a) requiring
the person concerned not to collect any money from investors or to launch any [collective
investment scheme];
(b) prohibiting
the person concerned from disposing of any of the properties of the [collective
investment scheme] acquired in violation of these regulations;
Regulation - 66. Action against intermediaries.
The Board may initiate action for
suspension or cancellation of registration of an intermediary holding a
certificate of registration under section 12 of the Act who fails to exercise due
diligence in the performance of its functions or fails to comply with its
obligations under these regulations: Provided that no such certificate of
registration shall be suspended or cancelled unless the procedure specified in
the regulations applicable to such intermediary is complied with.
Regulation - 67. Appeal to the Central Government 207.
[Any
person aggrieved by an order of the Board made, on and after the commencement
of the Securities Laws (Second Amendment) Act, 1999, (i.e., after 16th December,
1999), under these regulations may prefer an appeal to a Securities Appellate
Tribunal having jurisdiction in the matter.]
CHAPTER IX EXISTING COLLECTIVE INVESTMENT SCHEMES
Regulation - 68. Existing schemes to obtain provisional registration.
(1)
Any
person who has been operating a collective investment scheme at the time of
commencement of these regulations shall be deemed to be an existing collective
investment scheme and shall also comply with the provisions of this
Chapter.
Explanation:
The expression operating a collective investment scheme' shall include carrying
out the obligations undertaken in the various documents entered into with the
investors who have subscribed to the scheme.
(2)
An
existing collective investment scheme shall make an application to the Board in
the manner specified in regulation 5.
(3)
The
application made under sub-regulation (2) shall be dealt with in any of the
following manner:
(a)
by
grant of provisional registration by the Board under sub-regulation (1) of
regulation 71;
(b)
by
grant of a certificate of registration by the Board under regulation 10;
(c)
by
rejection of the application for registration by the Board under regulation 12.
Regulation - 69. No scheme to be launched until grant of registration.
No
existing collective investment scheme shall launch any new scheme or raise
money from the investors even under the existing scheme, unless a certificate
of registration is granted to it by the Board under regulation 10.
Regulation - 70. Consideration of application for grant of provisional registration.
(1)
The
applicant for the purpose of being considered eligible for the grant of
provisional registration shall satisfy the Board that:
(a)
the
schemes of the applicant are in the nature of collective investment schemes;
(b)
the
affairs of the applicant are not being conducted in a manner detrimental to the
interest of existing investors;
(c)
the
applicant has at least 50% independent directors at the time of making the
application;
Explanation:-
"Independent directors" shall mean directors who are not associates
of the persons operating the existing collective investment scheme.
(d)
any
person, directly or indirectly connected with it has not been granted
registration by the Board under the Act;
(2)
The
Board for the purposes of grant of provisional registration may, interalia,
inspect the schemes, books of accounts, records and documents of the applicant.
(3)
The
Board shall recover from the applicant such expenses including fees paid to the
auditor, appraising agency as may be incurred by it for the purposes of
inspecting the schemes, books of accounts, records and documents of the
applicant.
(4)
The
Board on being satisfied that the requirements specified in sub-regulation (1)
are not fulfilled may reject the application and the applicant thereupon shall
wind up its existing scheme (s) in the manner specified in regulation 73.
Regulation - 71. Grant of provisional registration.
(1)
The
Board after being satisfied that the conditions specified in regulation 70 are
fulfilled may grant provisional registration to the applicant subject to the
following conditions, namely:
(a)
the
applicant shall get the existing schemes rated by a credit rating agency
within [two] year from the date of grant of provisional
registration;
(b)
the
applicant shall get the existing schemes audited by an auditor within a period
of [two] year from the date of grant of
provisional registration;
(c)
the
applicant shall get existing schemes appraised by an appraising agency within a
period of [two] year from the date of grant of
provisional registration;
(d)
the
applicant shall create a trust and appoint trustees in the manner specified in
Chapter IV of these regulations within a period of [two] year from the date of grant of
provisional registration;
(e)
the
applicant shall comply with accounting and valuation norms in respect of
schemes floated before the commencement of these regulations as specified in
Part-II of the Ninth Schedule within a period of [two] year from the date of provisional
registration;
(f)
the
applicant shall meet the minimum net worth of Rupees one crore within one year
from the date of grant of provisional registration which shall be increased by
Rupees one crore each within two years, three years, four years and five years
from the date of grant of provisional registration.
(g)
the
applicant shall not dispose of the scheme property except for meeting
obligations arising under the offer document of the scheme.
(h)
the
applicant shall comply with the conditions specified in regulation 11;
(i)
such
other conditions which the Board may impose.
(2)
The
applicant shall give a written undertaking to the Board to comply with the
conditions specified in sub-regulation (1).
(3)
The
applicant who has been considered eligible for the grant of provisional
registration by the Board shall pay provisional registration fee as per the
Second Schedule.
(4)
An
applicant who after grant of provisional registration fails to comply with the
conditions as specified in sub-regulation (1) and regulation 9 shall not be
considered eligible for the grant of certificate of registration under
regulation 10 and shall wind up the scheme in the manner specified in
regulation 73.
Regulation - 72. Registration to existing scheme.
(1)
An
existing Collective Investment Scheme which satisfies the Board that the
requirements specified in regulation 9 and the conditions specified under
regulation 71 have been fulfilled, shall be granted a certificate of
registration under regulation 10 upon payment of registration fees as specified
in paragraph 2 of the Second Schedule and on such terms and conditions as may
be specified by the Board.
(2)
An
existing collective investment scheme which has been granted certificate of
registration under sub-regulation (1) may be allowed to float new schemes on
such terms and conditions as may be specified by the Board.
Regulation - 73. Manner of repayment and winding up.
(1)
An
existing collective investment scheme which;
(a)
has
failed to make an application for registration to the Board; or
(b)
has
not been granted provisional registration by the Board; or
(c)
having
obtained provisional registration fails to comply with the provisions of
regulation 71;
shall wind up the existing scheme.
(2)
The
existing collective investment scheme to be wound up under sub-regulation (1)
shall send an information memorandum to the investors who have subscribed to
the schemes, within two months from the date of receipt of intimation from the
Board, detailing the state of affairs of the scheme, the amount repayable to
each investor and the manner in which such amount is determined.
(3)
The
information memorandum referred to in sub-regulation (2) shall be dated and
signed by all the directors of the scheme.
(4)
The
Board may specify such other disclosures to be made in the information
memorandum, as it deems fit.
(5)
The
information memorandum shall be sent to the investors within one week from the
date of the information memorandum.
(6)
The
information memorandum shall explicitly state that investors desirous of
continuing with the scheme shall have to give a positive consent within one
month from the date of the information memorandum to continue with the scheme.
(7)
The
investors who give positive consent under sub-regulation (6), shall continue
with the scheme at their risk and responsibility.
Provided
that if the positive consent to continue with the scheme, is received from only
twenty five percent or less of the total number of existing investors, the
scheme shall be wound up.
(8)
The
payment to the investors, shall be made within three months of the date of the
information memorandum.
(9)
On
completion of the winding up, the existing collective investment scheme shall
file with the Board such reports, as may be specified by the Board.
Regulation - 74. Existing scheme not desirous of obtaining registration to repay.
An
existing collective investment scheme which is not desirous of obtaining
provisional registration from the Board shall formulate a scheme of repayment
and make such repayment to the existing investors in the manner specified in
regulation
[CHAPTER
IX A EXISTING SCHEMES OR ARRANGEMENTS DEEMED TO BE A COLLECTIVE INVESTMENT
SCHEME
Regulation - 74A. Existing schemes or arrangements deemed to be a collective investment scheme to obtain provisional registration.
(1) Any
person who has been operating a scheme or arrangement deemed to be a collective
investment scheme under the proviso to sub-section (1) of section 11AA of the
Act at the time of commencement of the Securities and Exchange Board of India
(Collective Investment Schemes) (Amendment) Regulations, 2014, shall be deemed
to be an existing collective investment scheme and shall also comply with the
provisions of Chapter IX:
Provided that any scheme or arrangement which
is otherwise regulated or prohibited under any other law shall not be deemed to
be a collective investment scheme.
Explanation: The expression 'operating a
scheme or arrangement deemed to be a collective investment scheme' shall
include carrying out the obligations undertaken in the various documents
entered into with the investors who have subscribed to the scheme or
arrangement.
(2) An
existing collective investment scheme shall make an application to the Board in
the manner specified in regulation 5.".
[CHAPTER IX-B POWER TO RELAX STRICT ENFORCEMENT OF
THE REGULATIONS
Regulation - 74B. Exemption from enforcement of the regulations in special cases.
(1)
The
Board may, exempt any person or class of persons from the operation of all or
any of the provisions of these regulations for a period as may be specified but
not exceeding twelve months, for furthering innovation [***] relating to testing new products, processes,
services, business models, etc. in live environment of regulatory sandbox in
the securities markets.
(2)
Any
exemption granted by the Board under sub-regulation (1) shall be subject to the
applicant satisfying such conditions as may be specified by the Board including
conditions to be complied with on a continuous basis.
Explanation.
For the purposes of these regulations, "regulatory sandbox" means a
live testing environment where new products, processes, services, business
models, etc. may be deployed on a limited set of eligible customers for a
specified period of time, for furthering innovation in the securities market,
subject to such conditions as may be specified by the Board.]
CHAPTER X MISCELLANEOUS
Regulation - 75. Power of the Board to issue clarifications.
In
order to remove any difficulties in the application or interpretation of these
regulations, the Board shall have the power to issue clarifications and
guidelines in the form of notes or circulars which shall be binding on the
trustee or Collective Investment Management Company or any other intermediary
in the capital market.
FIRST SCHEDULE - FORMS
FORM A
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulations 4, 5(2)]
APPLICATION FOR THE GRANT OF REGISTRATION AS
COLLECTIVE INVESTMENT MANAGEMENT COMPANY
1.
NAME
OF THE APPLICANT:
2.
CONTACT
PERSON:
3.
NAME
OF THE COMPLIANCE OFFICER:
TELEPHONE
NO.:
FAX
NO.:
4.
ADDRESS
OF THE REGISTERED OFFICE OF THE APPLICANT:
PIN
CODE:
TELEPHONE
NO. :
FAX
NO.:
5.
ADDRESS
OF THE APPLICANT FOR CORRESPONDENCE:
PIN
CODE:
TELEPHONE
NO. :
FAX
NO.:
6.
ADDRESS
OF BRANCH OFFICES (IN INDIA & ABROAD) OF THE APPLICANT, IF ANY:
7.
WHETHER
ANY OTHER APPLICATION UNDER SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992
HAS BEEN MADE FOR GRANT OF CERTIFICATE, IF SO, DETAILS THEREOF:
8.
DATE
AND PLACE OF INCORPORATION OF THE COLLECTIVE INVESTMENT MANAGEMENT
COMPANY:(Enclose a copy of certificate of incorporation)
9.
OBJECTS
OF THE COLLECTIVE INVESTMENT MANAGEMENT COMPANY: (Enclose copy of the
Memorandum and Articles of Association)
10.
MAIN
OBJECTS:
11.
ANCILLARY
OBJECTS: (the Memorandum and Articles of Association should have necessary
clause in respect of collective investment scheme and amendments, if any, shall
have to be incorporated in the existing Memorandum and Articles of Association)
12.
CAPITAL
STRUCTURE AND SHAREHOLDING PATTERN: (give list of major share holders
holding 5% or more voting rights and percentage of their share holdings,
as of the latest date)
13.
NET
WORTH OF THE COMPANY: (as of the latest date)
14.
PRESENT
LINE(S) OF BUSINESS ACTIVITIES: (History, major achievements and
present activity)
15.
FINANCIAL
INFORMATION: (Enclose Balance Sheet and Profit and Loss account for
the immediately preceding 3 years)
16.
ACCOUNTING
POLICIES: (Furnish description of significant accounting policies)
17.
NAMES
AND ACTIVITIES OF ASSOCIATE COMPANIES/CONCERNS CARRYING ON ACTIVITIES RELATED
TO THE SECURITIES MARKET AND GRANTED REGISTRATION BY SEBI:
18.
MANAGEMENT
OF THE COLLECTIVE INVESTMENT MANAGEMENT COMPANY:
19.
BOARD
OF DIRECTORS: (Indicate name, qualifications, background, experience,
whether directorship is on whole time/ part time basis, other directorships, of
the Directors. Whether any of the Directors is in full employment elsewhere;
give details thereof. If any of the Directors is a member of a professional
body i.e. the ICAI or ICSI, to furnish permission of the professional body for
acting as director of the applicant)
20.
KEY
MANAGEMENT PERSONNEL: (Furnish the names, qualifications, experience of
the key management personnel indicating their experience. Also, submit proof of
acceptance of appointment letter, latest salary slips)
21.
OTHER
EMPLOYEES: (Furnish the names, qualifications, experience of the other employees)
22.
DETAILS
OF INFRASTUCTURAL FACILITIES:
23.
OFFICE
SPACE: (Mention extent of area available at the place where the main
activity would be carried out; detail of office space available at all the
locations; certified copies of relevant sale deed/ lease deed/ rental agreement
etc. in respect of each of the premises to be enclosed.)
24.
OFFICE
EQUIPMENT: (mention the details of electronic office equipment, computers,
fax, telephones etc; submit proof of purchase of the above equipments.)
25.
INVOLVEMENT
IN CASES:
(a)
Court
cases/ litigations in which the applicant may have been involved in the last 3
years.
(b)
Involvement
in any offence relating to moral turpitude/ economic offences of the directors,
employees of the applicant in the last 3 years.
26.
AUDITORS
27.
OTHER
INFORMATION: Any other information considered relevant to the nature of
services rendered by the applicant.
Names and addresses of the auditors of the
applicant:
28.
DOCUMENTS:
Submit copies of:
(a)
Draft
Trust Deed; and
(b)
Draft
Investment Management Agreement
29.
INSTRUCTION
FOR FILLING UP THE FORM:
(a)
Applicants
must submit a completed application form together with appropriate supporting
documents to the Board.
(b)
It
is important that this application form should be filled in accordance with the
regulations.
(c)
An
application which is not complete is liable to be rejected.
(d)
Answers
must be typed and legible.
(e)
Information
which needs to be supplied in more details may be given on separate sheets
which should be attached to the application form.
(f)
The
application must be signed by the competent person having authority to do so
and all signatures must be in original.
FORM B
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 10]
CERTIFICATE OF REGISTRATION
In
exercise of the powers conferred by Section 30 of the Securities and Exchange
Board of India Act, 1992, (15 of 1992) read with the Securities and Exchange
Board of India (Collective Investment Scheme) Regulations, 1999 made thereunder
the Board hereby grants a certificate of registration to
__________________________________ as an Collective Investment Management
Company.
Registration
Code for the Collective Investment Management Company is CIMC/CIS/ / /
Date
FORM C
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 18(2)]
TRUSTEESHIP OF THE COLLECTION INVESTMENT SCHEME
(1)
Furnish
the following particulars:
(a)
Name
of the Institution.
(b)
Address/telephone/telex/fax
nos.
(c)
Name
of the contact person.
(d)
SEBI
Registration No.:
(e)
Management
of the trustee.
(f)
Details
of Infrastructure facilities Office Space/Office Equipment.
(g)
Court
cases / litigations in which the trustee may have been involved in
the last three years and whether the case is pending or has been adjudicated.
(h)
Any
penalty imposed by SEBI or by other regulatory bodies during the last three
years.
(i)
Any
other information considered relevant to the nature of services rendered
by the trustee.
(2)
INSTRUCTION
FOR FILLING UP THE FORM (See Form A)
SECOND SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulations 6, 10, 26(1), 59(g), 71(3), 72(1)]
FEES
1.
(a)
Application fees payable by the applicant: Rupees Twenty- Five Thousand
(b) Provisional registration fees payable by
existing collective investment scheme: Rupees Five Lacs [see para 2 below]
(c) Registration fees payable by the applicant for
grant of registration as collective investment management company: Rupees Ten
Lacs
(d) Filing fees for offer document: Rupees Twenty-
Five thousand
2.
The
applicant who has paid provisional registration fee of Rs.5 lacs under
sub-paragraph (b) of paragraph 1, shall pay remaining registration fee of Rs.5
lacs at the time of grant of registration.
3.
[The fees referred to in paragraphs 1 and 2 above,
shall be paid by way of direct credit into the bank account through
NEFT/RTGS/IMPS or online payment using the SEBI Payment Gateway or any other
mode as may be specified by the Board from time to time.]
THIRD SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulations 14(h), 21(8), 59(f)]
CODE OF CONDUCT
1.
Interests
of all classes of unit holders to be protected. The organisation,
operation and management of the Collective Investment Scheme and the creation
of assets therein shall be conducted -
(a)
in
the interest of all classes of unit holders of the scheme and
(b)
not
merely in the interests of the directors of the company or associated persons
or any special class of unit holders.
2.
Dissemination
of information
(a)
the
trustee and the Collective Investment Management Company shall ensure the
timely dissemination to all unit holders, of adequate accurate and explicit
information about the investment policies, investment objectives, financial position
and general affairs of the scheme;
(b)
all
such information shall be fairly presented in simple language.
3.
Conflict
of interest. The trustee and the Collective Investment Management Company
shall in managing the affairs of the schemes avoid conflicts of interest and
treat the interests of all unit holders paramount in all matters.
4.
Segregation. The
trustee and the Collective Investment Management Company shall ensure scheme
wise segregation of funds and assets as created.
5.
Integrity,
investments as per objects, etc. The trustee and the Collective Investment
Management Agency shall-
(a)
carry
on the business and make investments in accordance with the investment
objectives stated in the offer documents and take investment decisions solely
in the interests of unit holders;
(b)
not
use any unethical means for marketing their schemes or for inducing investors
to bring the same;
(c)
carry
on all their activities in the interests of unit holders and with strict regard
to integrity and honesty.
FOURTH SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 17(1)]
CONTENTS OF THE TRUST DEED
1.
Principal
Clauses. The Trust Deed shall contain the following clauses, namely:
(a)
the
responsibilities, obligations and rights of the trustee for the protection of
the assets of the scheme.
(b)
provisions
to ensure that management of scheme property shall be in accordance with that
specified in the offer document and these regulations.
(c)
the
responsibilities, obligations and rights of the Collective Investment
Management Company.
(d)
the
policies for issue, pricing of units and expenses of the scheme, including
payment of fees and distribution of income and gains and accounting.
(e)
the
policies for disclosures of the investors of various schemes objectives and
investment objectives in offer documents and advertisements and annual and
half-yearly reporting requirements.
(f)
provisions
to ensure that the auditor for the scheme shall be different from the Auditor
of the Collective Investment Management Company. Further, it shall contain
conditions of appointment, retirement, removal and replacement of auditor of
the scheme.
(g)
broad
policies regarding allocation of expenditure to capital or income.
(h)
provisions
to explicitly forbid the acquisition of any asset out of the trust property
which involves the assumption of any liability which is unlimited or shall not
result in encumbrance of the trust property in any way.
(i)
trusteeship
fee, if any, payable to the trustee.
(j)
provisions
to the effect that no amendment to the Trust Deed shall be carried out without
the prior approval of the Board and unit holders.
(k)
provisions
to ensure that removal of the trustee in all cases shall require the prior
approval of the Board and the provisions regarding appointment of new trustee
and their removal be specified.
(l)
procedure
for seeking approval of the unit holders.
(m)
provisions
for redressal of grievances of the investors and time within which such
complaints shall be redressed.
(n)
the
circumstances under which the assets may be disposed of with the approval of
the trustee.
(o)
provisions
regarding transfer of units, meeting of unit holders and maintenance of upto
date register of unit holders.
(p)
the
time within which the unit certificates shall be issued after allotment and the
time within which transfer of units shall be completed.
(q)
provisions
to ensure that any document required to be lodged with the Board shall be
signed by at least two Directors of the Collective Investment Management
Company with at least one of them being an independent director.
(r)
provisions
to ensure the public availability of the trust deed for inspection of
unitholders and investors.
(s)
provisions
to ensure that unit holders shall have beneficial interest in the trust
property to the extent of individual holding in respective schemes only.
2.
Trustee's
duties regarding information properly, etc. The Trust Deed shall lay down
that the trustee shall:
(a)
obtain
necessary information and a quarterly report from the Collective Investment
Management Company.
(b)
make
spot checks on the Collective Investment Management Company regarding pricing
of units and payment into and out of the scheme and proper accounting of the
income of the scheme and charging of expenses and distribution as permitted.
(c)
maintain
an arms' length relationship with other companies, or institutions or financial
intermediaries or any body corporate with which it may be associated.
(d)
take
into their custody, or under their control all the property of the schemes and
hold it in trust for the unit holders.
(e)
act
in the interest of the unit holders.
(f)
provide
or cause to be provide information to unit holders and Board as may be
specified by the Board.
(g)
enter
into an agreement for managing the scheme property with the Collective
Investment Management Company for this purpose, and shall enclose the same with
the Trust Deed.
(h)
supervise
the collection of any income due to be paid to the scheme and for claiming any
repayment of tax and holding any income received in trust for the holders in
accordance with the Trust Deed, Offer document and regulations.
(i)
take
reasonable care to ensure that the funds under the schemes floated by and
managed by the Collective Investment Management Company are in accordance with
the Trust Deed, Offer document and regulations.
(j)
have
to remove the Collective Investment Management Company under the specific
events only with the approval of Board in accordance with the regulations.
(k)
be
responsible for the supervision of its activities of the Collective Investment
Management Company in relation to the scheme and shall also act as a Custodian
of the assets of the scheme.
3.
Obligations
of the Company. The Trust Deed shall lay down that Collective Investment
Management Company shall:
(i)
float
schemes for the scheme after approval by the trustee, and manage the funds
mobilised under various schemes, in accordance with the provisions of the Trust
Deed, Offer document and regulations.
(ii)
not
invest the corpus of the scheme in other scheme.
(iii)
not
without the approval of the trustee publish or cause to be published any
advertisement containing any invitation to buy units, or any statement with
respect to the sale price of the units or the return expected from the scheme.
(iv)
use
its best endeavours to carry on and conduct its business in a proper and efficient
manner and to ensure that the scheme to which the deed relates is carried on
and conducted in a proper and efficient manner.
(v)
make
available to the trustee or to the auditors for inspection all the books of the
scheme.
(vi)
furnish
to the trustee or to the auditors such oral or written information as the
trustee or the auditor requires with respect to all matter relating to the
scheme or otherwise relating to the affairs of the scheme.
(vii)
not
exercise the right to vote in respect of any units relating to the scheme held
by the Collective Investment Management Company.
FIFTH SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 20(2)]
CONTENTS OF THE AGREEMENT FOR MANAGING SCHEME
PROPERTY
The
Investment Management Agreement shall contain the following clauses namely:
1.
Obligations
of the Collective Investment Management Company: The Collective Investment
Management Company:
(a)
shall
be responsible for floating schemes after obtaining approval from the trustee
and managing the funds mobilised under various schemes, in accordance with the
provisions of the Trust Deed, Offer document and regulations;
(b)
shall
invest the funds raised under various schemes in accordance with the provisions
of the Trust Deed, Offer document and the regulations;
(c)
shall
not acquire any assets out of the scheme property which involves the assumption
of any liability which is unlimited or which may result in encumbrance of the
scheme property in any way;
(d)
shall
not give or guarantee loans or take up any activity in contravention of the
regulations;
(e)
shall
ensure that no application form, or sales literature or other printed matter
issued to prospective investors, or advertisement, or report and or
announcement addressed to the general body of unit holders, or to the public,
or to the press or other communications media, is issued or published without
the trustee' prior approval in writing, and contains any statement or matter
extraneous to the Trust Deed or Offer Document scheme particulars approved by
the trustee and Board;
(f)
shall
submit quarterly reports on the functioning of the schemes to the trustee or at
such intervals as may be required by the trustee or Board.
2.
The
trustee:
(a)
shall
have the right to obtain from the Collective Investment Management Company all
information concerning the operations of the various schemes managed by the
Collective Investment Management Company at such intervals and in such a manner
as required by the trustee to ensure that the Collective Investment Management
Company is complying with the provisions of the Trust Deed, Offer document and
regulations;
(b)
shall
have the power to remove the Collective Investment Management Company under the
specific events only with the approval of Board in accordance with the
regulations.
3.
Meeting
the losses
No
loss or damage or expenses incurred by the Collective Investment Management
Company or its officers or any person delegated by the Collective Investment
Management Company, [, including those in relation to resolution of
claims or disputes of investors in terms of regulation 14A,] shall be met out
of the trust property.
SIXTH SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 26(2)]
CONTENTS OF THE OFFER DOCUMENT
1.
Contents. The
offer document filed with the Board shall contain, in addition to the
requirements specified in the regulations, following information so as to
enable the investors to make a true, fair and informed decision on the
investments in the scheme, namely:
1.
Outer
Cover Pages
1.1. Front Outer cover Page
(i)
The
front outer cover page of the offer document filed with the Board shall contain
the following details only:-
The
name of the scheme, name and address of the registered office of the Collective
Investment Management Company and trustee along with their telephone number and
fax number.
(ii)
The
nature, number, price and amount of the units offered.
(iii)
The
following clause in respect of general risk should be incorporated:
"Investment
in units involve a degree of risk and investors should not invest any funds in
this offer unless they can afford to take the risk of losing their investment.
Investors are advised to read the risk factors carefully before taking an
investment decision in this offering. For taking an investment decision,
investors must rely on their own examination of the scheme and the offer
including the risks involved. The units have not been recommended or approved
by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the
accuracy or adequacy of this document." .
Specific
attention of investors shall be invited to the summarised and detailed
statement of Risk Factors by indicating their page number(s) in the 'General
Risks'.
(iv)
"Collective
Investment Management Company's Absolute Responsibility clause to be
incorporated as under:
"The
Collective Investment Management Company, having made all reasonable inquiries,
accepts responsibility for and confirms that this offer document contains all
information with regard to the scheme and that the information contained in the
offer document is true and correct in all material aspects and is not
misleading in any material respect, that the opinions and intentions expressed
herein are honestly held and that there are no other facts, the omission of
which make this document as a whole or any of such information or the
expression of any such opinions or intentions misleading in any material
respect."
(v)
The
name and address of the Registrar to the issue along with the telephone number
and fax number.
(vi)
The
name and address of the auditor of the scheme.
(vii)
Opening,
Closing and Earliest closing date (if any) for the offer.
(viii)
Credit
Rating - Name of the Credit Rating Agency, the rating given, the tenure of the
rating.
(ix)
Name
of the Compliance Officer.
(x)
Name
of the appraising agency - A brief appraisal report.
(xi)
The
front cover page shall be transparent. No patterns or pictures shall be printed on
this page.
(xii)
The
cover page paper shall be of adequate thickness (preferably minimum 100 gcm quality).
1.2. Front Inside Cover Page Index shall
appear on the Front Inside Cover Page.
1.3. Inner cover Pages .The other risk factors
shall be printed in clear readable font (preferably of minimum point 10 size)
starting on the first inner cover page to be numbered page i (and, if need be,
shall continue on subsequent pages ii, iii, etc. as distinct from the page
number of the offer document proper which would run as 1, 2, 3, etc. ) in
addition to appearing in the offer document.
1.4. Back cover Pages. Back Inside Cover Page and
Back Outside Cover Page shall be in transparent and blank. Any 'notes' required to be
given prominence shall appear immediately after the Risk Factors wherever they
appear.
2.
Risk
Factors. The Collective Investment Management Company shall classify the
risk factors as those which are specific and internal to the scheme and those
which are external and beyond the control of the Collective Investment
Management Company. Collective Investment Management Company's perception of
the internal and external risk factors shall be given immediately after each of
the risk factors and not as a separate heading under management
perception.
3.
Disclaimer
Clause. The offer document shall contain the following disclaimer clause in
capital letters and bold.
It is to be distinctly understood that submission
of offer document to SEBI should not in any way be deemed or construed that the
same has been cleared or approved by SEBI. SEBI does not take any
responsibility either for the financial soundness of any scheme for which the
issue is proposed to be made or for the correctness of the statements made or
opinions expressed in the offer document. Collective Investment Management
Company, ______________ has certified that the disclosures made in the offer
document are generally adequate and are in conformity with SEBI (Collective
Investment Scheme), Regulations, 1999 in force for the time being. This
requirement is to facilitate unit holders to take an informed decision for
making investment in the proposed issue.
It should also be clearly understood that the
Collective Investment Management Company is primarily responsible for the
correctness, adequacy and disclosure of all relevant information in the offer
document.
WE THE COLLECTIVE INVESTMENT MANAGEMENT COMPANY CONFIRM
that: the offer document forwarded to SEBI is in conformity with the
documents, materials and paper relevant to the issue; all the legal
requirements connected with the said issue, as also the guidelines,
instructions, etc. issued by SEBI, the Government and any other competent
authority in this behalf have been duly complied with; and the disclosures made
in the offer document are true, fair and adequate to enable the investors to
make a well informed decision as to the investment in the proposed scheme.
We confirm that beside ourselves, all the
intermediaries named in the prospectus are registered with SEBI and till date
such registration is valid.
4.
Undertaking
from the Collective Investment Management Company. The following
undertaking by the Collective Investment Management Company shall be
incorporated in the offer document:
(i)
that
the complaints received in respect of the issue of units of the scheme would be
attended to expeditiously and satisfactorily.
(ii)
that
the funds required for despatch of refund orders/allotment letters/
certificates by registered post shall be made available to the Registrar to the
Issue by the Collective Investment Management Company.
(iii)
that
the certificates of the units/refund orders to the non-resident Indians shall
be despatched in time.
(iv)
that
no units shall be issued to the public later than six months after the date of
the offer document i.e. the date when the offer document is filed with the
Board.
5.
Fictitious
Applications. Any person who makes in a fictitious name an application for
acquiring or subscribing for any units of a scheme, or otherwise induces the
scheme to allot, or register any transfer of units therein to him, or to any
other person in a fictitious name, shall be punishable under the provisions of
the SEBI Act, 1992.
6.
Minimum
Subscription Clause. The Collective Investment Management Company shall state
that the minimum subscription of units necessary for the purpose of launching
the scheme.
The minimum subscription clause is to be
incorporated in the offer document as under: "If the scheme does not
receive the above stated minimum subscription of units from the public on the
date of closure of the issue, then the entire subscription amount received
shall be refunded forthwith".
7.
Maximum
Subscription Clause. The Collective Investment Management Company shall
state the maximum number of units that shall be offered through the offer
document.
Minimum and Maximum - by Apprising Agency compared.
8.
Terms
of the present issue
8.1. Terms of payments
8.2. Rights of the investors
8.3. How to apply - availability of forms, offer
document and mode of payment
8.4. Any special tax benefits for investing in the
scheme.
9.
Appraisal
of the Project. Project to be appraised by appraising agency for carrying
out appraisal and salient features of the appraisal report to be detailed. The
scope and purpose of the appraisal along with the date of appraisal may be
disclosed. The cost of the project and means of finance as per the appraisal
report should also be disclosed. The weakness and threats, if any, given in the
appraisal report should also be disclosed by way of risk factors.
10.
Project
relating to the scheme, The Collective Investment Management Company shall
disclose -
(i)
detail
particulars as are sufficient to disclose the true nature of the scheme.
(ii)
the
nature and description of property and the conditions or circumstances under
which it is will become vested with the trustee.
(iii)
with
respect to the property purchased or acquired or proposed to be purchased or
acquired in relation to the scheme, the following shall be given
the
name and address of the vendor (s)
the
amount of cash or other consideration paid or payable to the vendor or each
vendor, as the case may be
short
particulars of any transaction relating to the property, in which any vendor of
the property or any person who is, or was at the time of the transaction,
having control or controlling interest in or director of the Collective
Investment Management Company or directly or indirectly related to the
Collective investment management company.
(if
the property to be acquired by the trustee is to be taken on lease then the
term "vendor" would construe to mean "lessor", the
expression "purchase money" would include the consideration for the
lease)
(iv)
the
amount or estimated amount of -
(v)
the
expense of setting up the scheme; and
(vi)
the
expense of the issue, and the names of the persons by whom any of these
expenses have been paid or are payable.
11.
Management
of the Scheme
11.1. This section shall describe the manner in
which the scheme is managed. The disclosures shall include-
(i)
Identification
of Collective Investment Management Company and the name of the key personnel
of the Collective Investment Management Company who would be responsible for
managing the scheme along with his qualifications, experience and background;
(ii)
Name
and address of the Investor Relations Officer;
(iii)
The
name and the address of the Collective Investment Management Company and the
names and addresses of the Directors on the Board of the Collective Investment
Management Company with a brief description of the experience of the Collective
Investment Management Company;
(iv)
disclosure
of the date of entering the Investment Management Agreement.
(v)
Full
information regarding the remuneration/ compensation of the trustee and the
Collective Investment Management Company respectively, the manner in which that
remuneration/ compensation is provided for, and the changes (if any) that will
be made by way of that remuneration/ compensation upon the sale of or
subscription for any units of the scheme and upon the distribution of income
and capital or otherwise in connection with the scheme.
11.2. The identity of any other person who provides
significant administrative or business management services and a brief
description of the services provided and the compensation to be paid therefore;
11.3. The name and principal business address of
the Registrars and Transfer Agents. A statement to the effect that the trustee
and the Collective Investment Management Company have ensured that the
Registrar has adequate capacity to discharge responsibilities with regard to
processing of applications and despatching unit certificates to unit holders
within the time limit prescribed in the regulations and also has sufficient
capacity to handle investor complaints;
11.4. Identification and name and address of the
statutory auditor for the scheme;
12.
Constitution
of the Collective Investment Scheme. Under this head, the following shall
be discussed:
(i)
A
brief description of the objectives of the scheme'
(ii)
Functions
and responsibilities of the constituents of the Collective Investment Scheme
viz. Collective Investment Management Company and trustee;
(iii)
Names
and addresses of the Directors of the trustee and details of their principal
occupations and current directorships.
(iv)
Summary
of substantial provisions of the Trust Deed which may be of material interest
to the unit holders'
13.
Units
and Offer. Describe concisely the nature and the most significant
attributes of the units being offered, including:
(i)
The
minimum and maximum number of units on offer and refund beyond this amount
shall be disclosed.
(ii)
The
circumstances under which refund may take place and the period within which
refunds must be carried out.
(iii)
A
calendar indicating opening, closing, earliest closing, allotment and despatch
of certificates.
(iv)
The
period within which allotment and despatch of certificates will be completed
and relevant regulations in this regard alongwith a statement to the effect
that an advertisement will be published in a newspaper soon after completion of
allotment procedure.
(v)
Maturity
period or duration of the scheme.
(vi)
The
circumstances under which the scheme shall be wound up (in accordance with
regulations).
(vii)
Procedures
to be followed for transfer and transmission of units.
(viii)
The
rights of the unit holders including voting, calling of meetings etc.
(ix)
The
address where the register of unit holders is or will be kept and the days on
which and the hours during which the register is or will be accessible to the
public.
(x)
The
amount, if any, paid or payable as commission for subscribing or agreeing to
subscribe, or procuring or agreeing to procure subscriptions for any units of
the scheme, or the rate of any such commission. Also, the names of persons
having control or controlling interest in or director of the Collective
Investment Management Company who are entitled to receive any such commission
and the amount or rate of that commission.
(xi)
Any
amount or benefit paid or given or intended to be paid or given, to persons
having control or controlling interest in or director of the Collective
Investment Management Company out of the proceeds of an issue of units, and the
consideration for the payment or giving of the amount or benefit.
(xii)
The
policy regarding the valuation of any investment made or property held in
relation to the scheme.
(xiii)
The
policy regarding distribution of income to the unit holders derived from the
scheme.
14.
Outstanding
Litigations, Defaults, Dues, etc.
(i)
All
pending litigations in which the Collective Investment Management Company is
involved, defaults to the financial institutions/banks and non-payment of
statutory dues by the Collective Investment Management Company shall be listed
in the offer document together with the amounts involved and the present status
of such litigations/defaults.
(ii)
The
above information is required to be furnished in addition to the litigations
against the Collective Investment Management Company or against any other
entity whose outcome could have a materially adverse effect on the position of
the scheme.
(iii)
The
pending proceedings initiated for economic offences against the directors of
the Collective Investment Management Company, shall be disclosed separately
indicating their present status. The Collective Investment Management Company
shall furnish the details of the past cases in which penalties were imposed by
the concerned authorities.
(iv)
Outstanding
litigations, defaults, etc., pertaining to matters likely to affect operations
and finances of the scheme including disputed tax liabilities etc shall be
furnished in the offer document.
(v)
The
Collective Investment Management Company shall ensure to appropriately
incorporate in the offer document and as risk factor(s) information regarding
pending litigations, defaults, non payment of statutory dues and proceedings
initiated for economic offenses/Civil offences against the schemes.
(vi)
If
any of the above mentioned litigations, etc., arise after the filing of the
offer document, the facts shall be incorporated appropriately in the offer document
(and as risk factors). In case there are no such cases a distinct negative
statement is required to be made in this regard in the offer document.
(vii)
An
enquiry/ adjudication proceedings under the SEBI Act and the regulations made
thereunder, that are in progress against the scheme or any company associated
in any capacity with the Collective Investment Management Company, trustee or
any of the Directors or key personnel of the Collective Investment Management
Company shall be disclosed.
15.
Disclosure
on investor grievances and redressal system. The offer documents should
disclose the arrangements or any mechanism evolved by the Collective Investment
Management Company for redressal of investor grievances. By way of additional
information, the company should disclose the time normally taken by it for
disposal of various types of investor grievances. Also describe briefly the
investor's complaints history for the last three fiscal years of existing
scheme and the redressal mechanism, thereof. The offer document should include
data updated 30 days prior to the launch of the scheme on the number of
complaints received, redressed and pending with the collective investment
scheme.
16.
Disclosures
about stock invests. The disclosures regarding manner of obtaining Stockinvests,
and disposal of applications accompanied by Stockinvest, Mode of drawing
stockinvests, utilisation of stockinvests by third party, time period for
utilisation of stockinvests by the purchasers should be incorporated at the
appropriate places in the offer document in line with the prevailing
instructions of RBI in this regard. Further, name of the bank through which the
stockinvests shall be realised, shall be given in the offer document. Also the
following paragraph shall appear at the appropriate places.
"Registrars to the Issue have been authorised
by the trustee to sign on behalf of the trustee to realise the proceeds of the
Stockinvest from the issuing bank or to affix non-allotment advice on the
instrument or cancel the stockinvest of the non-allottees or partially
successful allottees who have enclosed more than one stockinvest. Such
cancelled Stockinvest shall be sent back by the Registrars directly to the
Investors."
Stockinvests should be marked account payee and
inscribed with the words -Collective Investment Scheme - A/c Scheme.
17.
Despatch
of Refund Orders. The following clause should be incorporated in the offer
document:
"The
trustee shall ensure despatch of refund orders of value over Rs.1500/- and unit
certificates by Registered Post only and adequate funds for the purpose will be
made available to the Registrars".
18.
Interest
in case of delay in despatch of allotment letters/ refund
orders . The caption should appear under terms of the present issue
and should contain the following:
"
The trustee agrees that as far as possible allotment of units offered to the
public shall be made within 30 days of the closure of the issue. The trustee
further agrees that it shall pay interest @15% per annum if the allotment
letters/ refund orders have not been despatched to the applicants within 30
days from the date of the closure of the issue.
19.
Appointment
of Compliance Officer. The name of compliance officer appointed should be
mentioned in the offer document with details such as telephone number, fax number
and address on which he/ she would be available. The investor's attention
should also be invited to contact the compliance officer in case of any
pre-issue / post - issue related problems.
20.
Promise
vis-à-vis performance. A separate para entitled "Promise Vs
Performance - ALL earlier Schemes" shall be given indicating whether all
the objects mentioned in the respective offer documents relating to the earlier
schemes launched by the Collective Investment Management Company were met and
whether all projections made in the said offer documents were achieved. If not,
non-achievement of objects/projections shall be brought out distinctly
(shortfall/delay to be quantified).
21.
Utilisation
of stockinvest by third parties. SI should be utilised by the purchaser(s)
and the purchaser's name/ name of one of the purchasers should be invariably
indicated as the first applicant in the share application form. Thus, if the
signature of the purchaser on the stockinvest and the signature of the first
applicant on the application form does not tally, the application should be
treated as having been accompanied by a third party stockinvest.
22.
Utilisation
of stockinvest within 10 days. Stockinvests are to be used by the
purchaser(s) within 10 days of issue and for the purpose. the last day for use
of the SI for submitting application to the bank is indicated on the face of
the SI with a notation "To be used before ..........".
23.
Due
Diligence Certificate-
(i)
The
Collective Investment Management Company, while filing the draft offer document
with the Board, shall furnish a due diligence certificate.
(ii)
The
Collective Investment Management Company shall also:
(a)
certify
that all amendments suggested/observations made by Board have been given effect
to in the offer document;
(b)
furnish
a fresh certificate immediately before the opening of the issue that no
corrective action on its part is needed.
(c)
furnish
a fresh certificate after the issue has opened but before it closes for
subscription.
24.
The
Collective Investment Management Company shall submit with the offer document
the following certificates:
(i)
all
refund orders of the previous issues were despatched within the prescribed time
and in the prescribed manner;
(ii)
all
unit certificates were despatched to the allottees within the prescribed time
and in the prescribed manner; and
25.
Appointment
of other intermediaries.
(i)
Collective
Investment Management Company should ensure that the intermediaries being
appointed are registered with the Board, wherever required. The Collective
Investment Management Company shall independently assess the capability and the
capacity of the various intermediaries to handle the issue.
(ii)
Collective
Investment Management Company should ensure that Bankers to the Issue are
appointed in all the mandatory collection centres.
(iii)
Collective
Investment Management Company shall ensure that Registrars to Issue registered
with the Board are appointed.
(iv)
Registrar
to an issue who is associated with the Collective Investment Management Company
as a promoter or a director shall not be allowed to act as Registrar for that
issue.
26.
Offer
document to be made public. The draft offer document filed with the Board
shall be made public for a period of 21 days from the date of filing the offer
document with the Board. The Collective Investment Management Company shall
make copies of offer document available to the public. Collective Investment
Management Company can charge an appropriate sum to the person requesting for
the copy.
27.
Despatch
of Issue Material. The Collective Investment Management Company shall
ensure that offer document and other issue materials are dispatched to the
bankers to the issue, investors association etc in advance.
28.
No
Complaints Certificate. After a period of 21 days from the date the draft
offer document was made public, the Collective Investment Management Company
shall file a statement with SEBI:
(i)
giving
a list of complaints received by it,
(ii)
a
statement by it whether it is proposed to amend the draft offer document or
not, and;
(iii)
highlight
those amendments.
29.
Mandatory
Collection Centres. There should be at least 30 mandatory collection
centres which should invariably include the places where stock exchanges have
been established.
30.
Authorised
Collection agents.
(i)
The
Collective Investment Management Company's are also permitted to appoint
authorised collection agents subject to necessary disclosures including the
names and addresses of such agents being mentioned in the offer document. While
the modalities of selection and appointment of collection agents are left to
the discretion of the Collective Investment Management Company's, it should be
ensured that the agents so selected are properly equipped for the purpose, both
in terms of infrastructure and manpower requirements.
(ii)
The
collection agents should be permitted to collect such applications as are
accompanied by payment of application moneys paid by cheques, drafts and
stockinvests. Under no circumstances they should be permitted to collect
application moneys in cash.
(iii)
The
applications so collected shall be deposited in the special unit application
account with designated scheduled bank either on the same date or latest by the
next working day. The application forms along with duly reconciled schedules
should be forwarded to the Registrars to the Issue after realisation of cheques
and after weeding out the applications in respect of cheques return cases,
within a period of 2 weeks from the date of closure of the issue.
(iv)
The
applications accompanied by stockinvests should be sent directly to the Registrars
to the Issue along with the schedules within one week from the date of closure
of the issue. Further, the offer documents and application forms should
specifically indicate that the acknowledgement of receipt of application moneys
given by the collection agents shall be valid and binding on the Collective
Investment Management Company and other persons connected with the issue.
(v)
The
investors from the places other than from the places where the mandatory
collection centres and authorised collection agents are located, can forward
their applications along with stockinvests to the Registrars to the Issue
directly by Registered Post with Acknowledgment Due and such applications shall
be dealt with by the Registrars to the Issue in the normal course.
31.
(a)
Post issue Monitoring reports. Collective Investment Management Company
shall ensure the submission of the post issue monitoring reports irrespective
of the level of subscription. These reports are required to be submitted within
3 working days from the due dates.
(b) 3-day post issue monitoring report. The
due date for this report shall be the 3rd day from the date of closure of
subscription of the issue.
(c) 98-day post issue monitoring report. The
due date for this report shall be the 98th day from the date of closure of
subscription of the issue.
32.
Bankers
to an issue. The trustee shall ensure that moneys received pursuant to the
issue shall be utilised only after the minimum subscription as mentioned in the
offer document has been received and a statement to that effect has been given
by the Registrars to the Issue.
33.
Post-issue
advertisements-
33.1. Collective Investment Management Company
shall ensure that in all issues, advertisement giving details relating to
oversubscription, basis of allotment, number, value and percentage of
applications received along with stockinvest, number, value and percentage of
successful allottees who have applied through stockinvest, date of completion
of despatch of refund orders, date of despatch of certificates is released
within 10 days from the date of completion of the various activities in at
least two national dailies.
33.2. Collective Investment Management Company
shall ensure that advisors/brokers or any other agencies connected with the
issue do not publish any advertisement stating that issue has been
oversubscribed or indicating investors' response to the issue, during the
period when the public issue is still open for subscription by the
public.
33.3. Advertisement stating that the subscription
list has been closed may be issued after the actual closure of the issue.
34.
Other
responsibilities-
34.1. In case of delay in refund of subscription
moneys/ excess subscription, the Collective Investment Management Company shall
ensure that the interest for the delayed period as mentioned in the offer
document, is paid to the applicants.
34.2. The Collective Investment Management Company
shall ensure that the despatch of refund orders/allotment letters /share
certificates is done by way of registered post /certificate of posting as may
be applicable.
35.
Certificate
Regarding Realisation of Stockinvests-
(i)
The
Collective Investment Management Company shall submit within two weeks from the
date of allotment, a Certificate to the trustee certifying that the
stockinvests on the basis of which allotment was finalised, have been realised.
(ii)
Subscription
list for the scheme shall be kept open for not more than 90 working days and
this fact should be disclosed in the offer document.
36.
Retention
of Over subscription. The quantum of issue shall not exceed the amount
specified in the offer document. However, an oversubscription to the extent of
10% of the amount mentioned is permissible for the purpose of rounding off to
the nearer multiple of 100 while finalising the allotment.
37.
Updation
of Offer Document.
(i)
The
Collective Investment Management Company should ensure that the particulars
(audited statement) contained therein should not be more than 6 months old from
issue opening date.
(ii)
Restrictions,
if any, on transfer and transmission of units.
(iii)
Tax
treatment of Investments in schemes.
A detailed write-up on the various tax benefits
that are available and the taxes that are charged to the unit holders in the
schemes.
38.
Basis
of Allotment. In each and every issue of units to the public that has been
oversubscribed, the Collective Investment Management Company and the Registrar
to an Issue, shall ensure that allotments are made in the following manner:
(a)
Proportionate
allotment procedure: The allotment shall be subject to allotment in
marketable lots, on a proportionate basis as explained below:
(i)
Applicants
will be categorised according to the number of units applied for.
(ii)
The
total number of units to be allotted to each category as a whole shall be
arrived at on a proportionate basis i.e. the total number of units applied for
in that category (number of applicants in the category x number of units
applied for) multiplied by the inverse of the oversubscription ratio as
illustrated below:
|
Total
number of applicants in category of
|
100s
- 1,500
|
|
Total
number of units applied for
|
1,
50,000
|
|
Number
of times oversubscribed
|
3
|
|
Proportionate
allotment to category
|
1,
50,000 × 1/3 = 50,000
|
Number
of the units to be allotted to the successful allottees will be arrived at on a
proportionate basis i.e. total number of units applied for by each applicant in
that category multiplied by the inverse of the oversubscription ratio.
|
Number
of units applied for by each applicant
|
100
|
|
Number
of times oversubscribed
|
3
|
|
Proportionate
allotment to each successful applicant
|
100
× 1/3 = 33
|
(iii)
All
the applications where the proportionate allotment works out to less than 100
units per applicant, the allotment shall be made as follows:
Each successful applicant shall be allotted a
minimum of 100 units; and
(iv)
The
successful applicants out of the total applicants for that category shall be
determined by drawl of lots in such a manner that the total number of units
allotted in that category is equal to the number of units worked out as per
(ii) above.
(v)
If
the proportionate allotment to an applicant works out to a number that is more
than 100 but is not a multiple of 100 (which is the marketable lot), the number
in excess of the multiple of 100 would be rounded off to the higher multiple of
100 if that number is 50 or higher. If that number is lower than 50, it would
be rounded off to the lower multiple of 100. (As an illustration, if the
proportionate allotment works out to 250, the applicant would be allotted 300
units. If however the proportionate allotment works out to 240, the applicant
would be allotted 200 units). All applicants in such categories would be
allotted units arrived at after such rounding off.
(vi)
If
the units allocated on a proportionate basis to any category is more than the
units allotted to the applicants in that category, the balance available units
for allotment shall be first adjusted against the category comprising
applicants applying m number of units and thereafter the remaining, if any
surplus still remains, should be adjusted to next higher category and so on
till the surplus is fully used.
(vii)
As
the process of rounding off to the nearer multiple of 100 may result in the
actual allocation being higher than the units offered, it would be necessary to
allow a 10% margin i.e. the final allotment may be higher upto 110% of the size
of the offering.
39.
The
Date of the Offer Document. The date of the offer document shall be
reckoned to be the date when the offer document was filed with the Board.
40.
Trust
Deed-
(a)
The
offer date shall mention the date of, and parties to, the trust deed relating
to the collective investment scheme.
(b)
The
summary of the provisions of the trust deed and the regulation regarding the
retirement, removal and replacement of trustee and Collective Investment
Management Company.
41.
Schemes
and investments. All offer documents shall contain:
(a)
All
offer documents shall contain the name and description and the date of
commencement of operation of every other scheme involving the issue of units to
the public conducted by the Collective Investment Management Company within the
5 years immediately preceding the date of the offer document.
(b)
A
report by the Collective Investment Management Company summarising the current
investment relating to the scheme made up to a date not more than 28 days
before the date of the offer document.
(c)
A
report by the auditor of the scheme, in respect of every issue of units
relating to any other scheme, launched by the Collective Investment Management
Company, within the five financial years immediately preceding the date of the
offer document, setting out - such information as sufficiently discloses the number
of distribution (if any) of income to holders to units relating to a collective
investment scheme in each of the 5 financial years immediately preceding the
date of the offer document during which those units had been in existence, the
amount and each distribution and the nature and value of each of the components
of the distribution.
(d)
A
report by the auditors of the scheme, setting out the profits or losses of the
Collective Investment Management Company in respect of each of the 5 financial
years immediately preceding the date of the offer document during which the
Collective Investment Management Company was carrying on business, and the
rates of dividends (if any) paid by the company in respect of each of those
years, and the assets and liabilities of the Collective Investment Management
Company as at the last date to which its accounts were made up being a date no
more than 12 months before the date of issue of the offer document.
SEVENTH SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 27(1)]
ADVERTISEMENT CODE
(1)
A
scheme advertisement shall:
(a)
be
truthful, fair and clear and shall not contain any statement which is untrue or
misleading.
(b)
be
set forth in a clear, concise and understandable language. Extensive use of
technical, legal terminology or complex language and the inclusion of excessive
details which may detract the investor, shall be avoided.
(c)
not
contain statements which promise or guarantee an appreciation of rapid profits.
(d)
not
contain any information or language that is not contained in the offer
document.
(e)
not
include any slogans or brand names except the normal commercial name of the
schemes.
(f)
not
have slogans, expletives or non-factual and unsubstantiated titles.
(g)
contain
risk factors giving equal importance in all respects including the
print size. The print size of highlights and risk factors in issue
advertisements shall not be less than point 9 size. It shall mention the names
of schemes, Collective Investment Management Company, trustee, address of their
registered office and Registrars to the Issue.
(h)
contain
"Risk Factors" in respect of the concerned issue.
Provided
that an offer opening / closing advertisement which does not contain the
highlights need not contain risk factors.
(2)
A
scheme advertisement shall be considered to be misleading, if it contains-
(i)
statements
made about the performance or activities of the schemes in the absence of
necessary explanatory or qualifying statements, which may give an exaggerated
picture of the performance or activities, than what it really is.
(ii)
an
inaccurate portrayal of past performance or its portrayal in a manner which
implies that past gains or income will be repeated in the future.
(3)
Any
advertisement reproducing or purporting to reproduce any information contained
in a offer document shall reproduce such information in full and disclose all
relevant facts and not be restricted to select extracts relating to that item.
(4)
No
models, celebrities, fictional characters, landmarks or caricatures or the
likes shall be displayed on or form part of the offer documents or
advertisements of the scheme.
(5)
No
corporate advertisement of the Collective Investment Management Company shall
be issued after 21 days of the filing of the offer document with the Board till
the closure of the scheme unless the risk factors as are required to be
mentioned in the offer document, are mentioned in such advertisement.
(6)
No
advertisement shall be issued stating that the scheme has been fully subscribed
or oversubscribed during the period the scheme is open for subscription, except
to the effect that the issue is open or closed. No announcement regarding
closure of the issue shall be made except on the last closing date. If the
scheme is fully subscribed before the last closing date as stated in the offer
document, the announcement shall be made only after the scheme is fully
subscribed and such announcement is made on the date on which the issued is to
be closed.
(7)
Announcement
regarding closure of scheme shall be made only after the trustee is satisfied
that at least minimum number of units have been subscribed and a certificate
has been obtained to that effect from the Registrar to the Issue.
(8)
No
incentives shall be offered through any advertisements to anyone associated
with marketing the issue.
(9)
In
case there is a reservation for the Non-resident Indians, the scheme
advertisement shall specify the same and indicate the place in India from where
the individual NRI applicant can procure application forms.
(10)
The
advertisement shall not compare one scheme with another, implicitly or
explicitly, unless the comparison is fair and all information relevant to the
comparison is included in the advertisement.
(11)
If
any existing collective investment scheme indicates the past performance of the
scheme in advertisements, the basis for computing the rates of return/yield and
adjustments made (if any) must be expressly indicated with a statement that,
such information is not necessarily indicative of future results and may not
necessarily provide a basis for comparison with other investments.
(12)
Advertisements
on the performance of a scheme or its Collective Investment Management Company
shall compare the past performances only on the basis of per unit of statistics
as per these regulations. Advertisements for NAVs, if any, must indicate the
past as well as the latest NAV of a scheme. The yield calculations shall be
made as provided in these regulations.
(13)
The
trustee shall:
(i)
ensure
strict compliance by the Collective Investment Management Company set with the
code of advertisement set out above.
(ii)
obtain
an undertaking from the Collective Investment Management Company to the effect
that the Collective Investment Management Company shall not directly or
indirectly release, during any conference or at any other time, any material or
information which is not contained in the offer documents.
(iii)
ensure
that the Collective Investment Management Company obtains approval in respect
of all scheme advertisements and publicity materials from them.
EIGHTH SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
[Regulation 51]
PROCEDURE FOR CONDUCT OF MEETINGS
MEETINGS: Procedure
relating to conduct of meeting are as follows:
The
trustee or unit holders holding one-tenth in nominal value of the unit capital
of the scheme may call a meeting of the unit holders in the manner as set out
below.
(i)
Within
21 days of the receipt of the notice from the unit holders, the trustee shall
call a meeting of the unit holders by causing to send a notice by post of the
proposed meeting at least 7 days before the proposed meeting to each of the
unit holders or, in the case of joint holders, to the joint holder whose name
appears first in the records.
(ii)
The
trustee shall preside as chairman at every meeting.
(iii)
Any
unit holder may appoint another person as his proxy to attend and vote instead
of himself.
(iv)
Proxy
so appointed shall not have any right to speak at the meeting.
(v)
Each
unit holder shall have one vote for every 1.00 unit of capital contributed by
him (or his predecessor in title). Except where expressly provided to the
contrary in the deed or the regulations, all decisions relating to the scheme
shall be by ordinary resolution. Equality of voting shall result in the
resolution being deemed lost. The Chairman shall have a casting vote. An
extraordinary resolution shall be carried if three-quarters of the votes are in
favour of the resolution.
(vi)
No
business shall be transacted at a meeting without a quorum. Quorum shall be met
if unit holders (including proxies) holding at least one-tenths in nominal
value of the unit capital of the scheme are present at the meeting.
(vii)
The
Collective Investment Management Company shall keep a minute book in which the
Minutes and Resolutions of each meeting shall be recorded.
(viii)
At
any meeting a resolution put to the vote of the meeting shall be decided on a
show of hands unless a poll is demanded by the Chairman or by any unit holder
present in person.
(ix)
Entry
of a resolution in the Minute Book shall be conclusive evidence of the number
of votes recorded in favour of or against the resolution.
(x)
A
resolution of the unit holders shall be invalid if it constitutes a fraud on
those unit holders who oppose the resolution.
NINTH SCHEDULE
SECURITIES AND EXCHANGE BOARD OF INDIA
(COLLECTIVE INVESTMENT SCHEME) REGULATIONS, 1999
ACCOUNTING NORMS, INVESTMENTS AND EXPENSE CEILING
[Regulations 21(13), 43(1), 44(4)(iii), 71(1)(e)]
[PART I-CEILING ON EXPENSES
The
expenses incurred shall be subject to a ceiling as specified below:
(1)
Initial
Issue Expenses;
(a)
These
may include:
cost
of offer documents and related costs;
marketing
and selling expenses including agents' commission, if any;
fees
to Lead Managers, if any, Registrars and collecting banks;
initial
rating and appraisal fees.
(b)
These
expenses may be borne by the collective investment scheme.
(c)
These
expenses shall not exceed 2.00 percent of the funds raised under the collective
investment scheme.
(2)
Annual
recurring expenses
(a)
Annual
recurring expenses consist of the following:
(i)
Management
and Advisory Fees;
(ii)
Registrar
fees for transfer of units sold or redeemed;
(iii)
Fees
and expenses of trustees;
(iv)
Audit
fees;
(v)
Subsequent
Rating and Appraisal fees; and
(vi)
Listing
fees.
(b)
The
annual recurring expenses shall not exceed 2 percent of the funds raised under
the collective investment scheme.
(c)
Incentive
fees
No
incentive fee based on performance of the scheme shall be charged to the scheme
in any form or manner.
(3)
Other
Expenses
Other
direct costs, if any, which are incidental to the operation of the collective
investment scheme may be charged to scheme, as may be approved by trustee:
Provided
that granular (item wise) list of direct costs covering at least eighty percent
expenses shall be disclosed in offer document and a quarterly disclosure of
actual expenses shall be made.
(4)
All
other expenses shall be borne by the Collective Investment Management Company:
Provided
that collective investment scheme related expenses including commission paid to
distributors, by whatever name it may be called and in whatever manner it may
be paid, shall necessarily be paid from the scheme only within the regulatory
limits and not from the books of the Collective Investment Management Company,
its associate, promoter (s), trustee or any other entity or through any other
route:
Provided
further that Collective Investment Management Companies shall adopt full trail
model of commission in all schemes, without payment of any upfront commission
or up fronting of any trail commission, directly or indirectly, in cash or
kind, through sponsorships, or any other route.]
[38]
Regulation - 33. Transfer of units.
Substituted by SEBI (Procedure for Holding Enquiry by Enquiry Officer
and Imposing Penalty) Regulations, 2002 w.e.f. 27.09.2002. Prior to
substitution it read as under :
"56. Communications
of findings, etc.
(1) The
Board shall, after consideration of the report referred to in regulation 55,
communicate the findings to the trustee or Collective Investment Management
Company as the case may be, and give him an opportunity of being heard within
fourteen days from the date of receipt of such communication.
(2) Without
prejudice to its right to initiate necessary action under the Act and these
regulations, the Board upon receipt of the reply, if any, from the trustee or
Collective Investment Management Company may call upon it to take such remedial
measures as the Board may direct in this behalf and may also initiate action
under Chapter VIII of these regulations."
Substituted by Securities and Exchange Board of India (Payment of Fees
and Mode of Payment) (Amendment) Regulations, 2023 vide Notification No.
SEBI/LAD-NRO/GN/2023/121 dated 07.02.2023, w.e.f. 01.04.2023, for the
following:-
"3. The
fees referred to in paragraphs 1 and 2 above, shall be paid [by way of
direct credit in the bank account through NEFT/RTGS/IMPS or any other mode
allowed by RBI or] by means of a bank draft in favour of "Securities and
Exchange Board of India" at Mumbai or at the regional offices where the
application for registration or draft offer document is submitted."
Substituted by Securities and Exchange Board of India (Collective
Investment Schemes) (Amendment) Regulations, 2022, vide Notification No.
SEBI/LAD-NRO/GN/2022/84, dated 10.05.2022, for the following:-
"PART I - CEILING ON EXPENSES
The expenses
incurred shall be subject to a ceiling as specified below:
(1) Initial
Issue Expenses-
(a) These
may include:
·
cost of
offer documents and related costs;
·
marketing
and selling expenses including agents' commission, if any;
·
fees to Lead
managers, if any, Registrars and collecting banks
·
initial
rating and appraisal fees.
(b) These
expenses shall be borne by the scheme.
(c) These
expenses shall not exceed
(i) 7.00 per
cent of the funds raised under the scheme for a scheme of duration upto 8 years
and
(ii) 9.00
per cent of the funds raised under the scheme for a scheme having a duration of
more than 8 years.
(d) These
expenses shall be amortized equally over a period not exceeding seven years or
the period of the scheme, whichever is less.
(2)
Management and Advisory Fees to CIMC
(a) Such fees
may consist of:
·
Basic Fee
·
Incentive
Fee
(b) The
'basic fee' shall not exceed:
(i) 1.00 per
cent each year of the funds raised under the scheme for the first five years of
operation of the scheme;
(ii) 1.25
per cent each year of the funds raised under the scheme for the next five years
of operation of the scheme;
(iii) 1.50
per cent each year of the funds raised under the scheme for the subsequent
period thereof till the termination of the scheme.
Incentive
fees. The incentive fees shall not exceed 25 per cent of the excess return
realised over and above the indicative return as shown in the offer document
(excluding the unit capital) at the time of the termination of the scheme. In
case the return at the termination of the scheme is less than or equal to the
indicative return as shown in the offer document, then no incentive fees shall
be aid.
(3) Other
Expenses Only the following expenses should be borne by the scheme namely :
·
registrar
services for transfer of units sold or redeemed;
·
fees and
expenses of trustees;
·
audit fees;
·
subsequent
rating and appraisal fees;
·
listing
fees;
·
Other direct
costs (if any) which are incidental to the operation of the scheme, as may be
approved by trustee;
(4) All
other expenses shall be borne by the CIMC."