SEBI panel draws up broad definition for collective investment schemes

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Saturday, May 9, 1998

SEBI panel draws up broad definition for collective investment schemes

Our Market Bureau

Mumbai, May 8: The SA Dave committee appointed by Sebi to work out the guidelines for collective investment schemes on Friday has drafted the definition of such schemes. In a related development, the representatives of credit-rating agencies are likely to meet Sebi officials on May 13 to discuss certain issues related to the rating of such companies, which has been based on a report presented by the ministry of agriculture.

The committee is likely to meet on May 27 to finalise the recommendations put forth at today's meeting. According to the committee, collective investment schemes can be defined under four broad lines.

With respect to property of any description, the purpose of which is to enable the investors to participate in the arrangements by way of contributions and to receive profits or income or produce arising from the management of such property or investments made thereof, n the contributions of the investors, by whatever name they are called, are pooled, and are utilised solely for thepurposes of the scheme or the arrangement,

the property or such contributions is managed as a whole on behalf of the investors, whether or not such properties or contributions and the investments made thereof are evidenced by identifiable properties, and

the investors do not have day-to-day control over the management of the property.

A scheme has to fulfil all the four criteria to be defined as a collective investment scheme.

While defining what constitutes a collective investment scheme, the committee has also outlined those schemes which do not come under this category. These are:

acceptance of deposits by companies and NBFCs under section 58A of the Companies Act;

acceptance of fund by chit funds in terms of Chit Funds Act, 1982;

acceptance of fund by nidhi companies from its members or as per the direction of the central government issued under section 637A of the Companies Act;

contracts of insurance under Insurance Act, 1938;

schemes devised by theemployer for the benefit of its employees such as provident fund, pension schemes;

arrangements of building societies or co-operative societies under Co-operative Societies Act, 1912, including arrangements of cooperative societies registered under Co-operative Societies Act under various state legislations;

schemes of mutual funds registered under Sebi (Mutual Funds) Regulations; and

any other schemes as may be declared as such by Sebi.

According to the committee chairman SA Dave, the members discussed the importance of giving more legal powers to Sebi which could enable it to work for investor protection and guidance.