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CS Executive · Capital Market and Securities Laws · Collective Investment Schemes

Greenfield Agro Ltd invites the public to contribute money to a pooled plantation scheme. The company manages the land on behalf of contributors, who expect to receive produce and income from it and have no day-to-day control over operations. Under Section 11AA of the SEBI Act, 1992, how is this arrangement classified?

The arrangement is a collective investment scheme because it pools contributions, aims at profits, income or produce, is managed on investors' behalf, and gives investors no day-to-day control, which are the four conditions in Section 11AA(2) of the SEBI Act.

  1. AA collective investment scheme, because all the conditions in the sub-section (2) test are metCorrect
  2. BNot a collective investment scheme, because investors expect produce rather than money
  3. CNot a collective investment scheme, because the scheme is managed by a company
  4. DA collective investment scheme only if it is also registered as a mutual fund

Explanation

Section 11AA(2) requires pooling of contributions, a view to receive profits, income, produce or property, management on behalf of investors, and no day-to-day investor control. All four are present. Produce is expressly listed, so option B is wrong.

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