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

Kaveri Realty Pooled Fund collects Rs 150 crore from investors under an arrangement that is not registered with SEBI and is not covered by Section 11AA(3). Under the proviso to Section 11AA(1) of the SEBI Act, 1992, what is its status?

It is deemed to be a collective investment scheme. The proviso to Section 11AA(1) treats any unregistered pooling arrangement not covered by sub-section (3) with a corpus of one hundred crore rupees or more as a collective investment scheme, without requiring proof of the four conditions.

  1. AIt is deemed to be a collective investment scheme because the corpus is Rs 100 crore or moreCorrect
  2. BIt is not a collective investment scheme unless all four sub-section (2) conditions are proven
  3. CIt is a mutual fund because the corpus is large
  4. DIt is outside SEBI's scope because it is unregistered

Explanation

The proviso to Section 11AA(1) deems any pooling of funds that is unregistered and not within sub-section (3), with a corpus of Rs 100 crore or more, to be a collective investment scheme. Rs 150 crore exceeds the threshold, so proof of the four conditions is not needed. Being unregistered does not take it out of SEBI's reach.

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