According to the panel, the collective investment schemes should be constituted in the form of a trust and the instrument of the trust shall be in the form of a deed duly approved by Sebi and executed by the collective investment management company in favour of the trustee. The structural recommendations state that only trustees registered with Sebi be permitted to act as trustees to collective investment schemes. On the type of schemes that can be floated, the committee recommends that every scheme will have to file offer documents with Sebi containing adequate disclosures to enable the investors to take informedinvestment decisions.

The final draft regulations on collective investment schemes penned by the panel were presented presented to Sebi on December 31. These recommendations will now be open to public for their views. The committee has recommended mandatory credit rating, project appraisal, yearly evaluation, crop and assets insurance and a net worth of Rs 10 crore for all new schemes.According to the panel, the collective investment schemes have to be close ended and no scheme can be floated for less than three years. On accounting norms, it has been suggested that the total unit capital raised by the plantation companies be treated as a liability by the company.

These guidelines pertain to all plantation companies who have collected monies from public for investment purposes. However, this does not include tea plantations and rubber plantations. These plantations would be included in the definition and brought under the purview of these regulations if they collect money from investors.

The existingplantation schemes will be given a period of three years in which they have to comply with the new guidelines after the gazetted notification comes out. The recommendations put forward by the committee say the collective investment schemes can be floated only by public or private limited companies registered under the provisions of the Companies Act, 1956. The company floating a collective investment scheme have to seek registration with Sebi as a collective investment management company. A minimum net worth of Rs 10 crore has also been recommended for collective investment management companies. These companies would have to demonstrate that they have the capacity to carry out the duties of a collective investment management company efficiently, honestly and fairly. The recommendations also state that each scheme will have to obtain a rating from a recognised credit rating agency. The projects being undertaken must also be appraised by an empanelled appraising agency.

"This will give an investor confidenceto come into these schemes," says the report, adding that the indicative returns suggested by these schemes will not be treated as assured return as these schemes are for very long periods. "The indicative returns should be based on the project appraisal that has to be complusorily carried out before the launch of a schemes. This project appraisal can be done by NABARD, the forest department or any agricultural institute," says the report. According to the recommendations, the schemes are prohibited from guaranteeing assured returns. The committee has also recommended that the advertisements in respect of every scheme shall have to conform to the advertisement code and that no scheme shall be kept open for subscription for more than 180 days. The schemes shall be close-ended in nature. The scheme shall indicate the minimum and maximum amount proposed to be raised over this period.