In a 'Collective Investment Scheme (CIS), the payments are pooled in by the investors for certain pre-specified purposes and profits or income are later shared among them.

However, there have been numerous cases of investors being cheated in the name of CISs and in many cases the operators of these schemes disappear after some time and the investors are left in a lurch.

A senior official at Sebi said that more than one lakh investor complaints are currently pending with it, and in most of the cases the matter is sub-judice since long.

While Securities and Exchange Board of India (Sebi) is the regulatory authority for such schemes, a number of other government agencies and departments also govern similar investment products and a lack of clarity in this regard comes in the way of brining the guilty to book, the official added.

Some of the most famous CISs are related to investments for real estate properties, plantation and agriculture industry and art funds, among others.

In a board memorandum submitted during its last meeting on January 3, Sebi said that "it is clear that certain individuals/companies are able to raise money from gullible individuals by taking advantage of the loopholes in the legal provisions and also taking advantage of lack of clarity about roles of different agencies like MCA, SEBI, RBI, State Governments, Registered co-operative societies etc."

Sebi further told its board, which includes nominees from the MCA (Ministry of Corporate Affairs), Finance Ministry and RBI, that certain exemptions in the current regulations also "leave scope for people to take a stand that their scheme is not a collective investment scheme and that they have got relevant licenses/approvals from the competent authorities."

"There appears to be a need to bring this matter under one principal regulator to deal with all cases where pooling of money is taking place and investments are being made," Sebi said.

It further said that various exemptions also needed to be either completely removed or drastically pruned and "in case of pruning, there is need to provide criteria such as maximum number of investors or the minimum amount intended to be raised beyond which all have to get registered with the principal regulator."

As per Sebi, there is only one entity registered with Sebi as a Collective Investment Management Company, but it has not launched any scheme as yet.

On the other hand, as many as 32 cases are currently under examination for applicability of SEBI (CIS) Regulations, while there are 1.09 lakh complaints pertaining to CIS.

"With regard to these complaints, it may be noted that since most of the CIS related cases are currently sub-judice, the redressal of such complaints depends on the outcome of these cases," Sebi said.

The government had first decide to frame CIS regulations and named Sebi as a regulator in 1997, after a number of agro-based and plantation companies in 1990s started raising money from public through agro and plantation bonds.

Thereafter, it was made mandatory for all such companies to register with Sebi. The existing entities were also asked to get registered with Sebi, and those not being able to get a go-ahead were asked to wind up their operations.

As per Sebi, 664 CIS entities had raised Rs 3,518 crore in 1998-99. Out of these 664 CIS entities, 54 CIS entities wound up their schemes and refunded the money to the investors.

None of the companies that applied for registration at the time were found to be eligible for final registration as a Collective Investment Management Company under the SEBI (CIS) Regulations.

SEBI had issued directions to the remaining 610 entities directing them to refund the money collected under the schemes with returns due to investors as per the terms of the offer within a period of one month from the date of the Order.

Subsequently, 21 CIS entities wound up their schemes and repaid the investors. Hence a total of 75 CIS entities had wound up their schemes and refunded the money to investors.

In 19 cases, courts had imposed stay orders/ appointed official liquidators/administrators.

Against the remaining entities that failed to wind up their schemes and repay the investors, Sebi took actions such as prosecution, sough their winding up and initiation of criminal proceedings.

Some of the CIS cases listed out by Sebi include an entity that claimed to be involved in the sale of trees to investors whereas in reality it was having collective investment schemes in the guise of this business.

In another case an entity had invited contributions to invest in land and allotted land to investors.

Sebi said that the CIS regulations were incorporated at a time when large scale funds were mopped up by plantation and agro companies and investors lost money.

"While there has been a change in market dynamics of investment management activities over a period of time, the regulations have remained constant.

"Moreover, the definition of CIS is broad in nature leaving room for many activities to fall under the purview of CIS Regulations. Hence, re-examination of CIS regulations may be considered to clearly specify its scope," it noted.