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CS Executive · Capital Market and Securities Laws · Mutual Funds

Aarav Traders pools money from several investors, manages it on their behalf and gives investors no day-to-day control. Under Section 11AA of the SEBI Act, 1992, which arrangement is expressly excluded from being a collective investment scheme?

Contributions that are in the nature of subscription to a mutual fund are expressly excluded from the definition of a collective investment scheme under Section 11AA(3)(viii) of the SEBI Act. Other pooled arrangements with managed funds and no investor control remain collective investment schemes.

  1. AA scheme where contributions are in the nature of subscription to a mutual fundCorrect
  2. BA pooled plantation scheme with a corpus of Rs 50 crore not registered with SEBI
  3. CA pooled scheme where investors have no day-to-day control and expect profits
  4. DA pooled scheme with a corpus of Rs 100 crore that is not registered with SEBI

Explanation

Section 11AA(3)(viii) says a scheme under which contributions are in the nature of subscription to a mutual fund is not a collective investment scheme. The other options satisfy the conditions of sub-section (2) or fall under the deeming proviso for unregistered pooling of Rs 100 crore or more.

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