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CS Executive · Capital Market and Securities Laws · Mutual Funds

Meera subscribes to units of a registered mutual fund scheme. Under Section 11AA of the SEBI Act, 1992, how is her contribution treated in relation to the definition of collective investment scheme?

Her contribution is excluded from the definition of a collective investment scheme. Section 11AA(3)(viii) provides that schemes under which contributions are in the nature of subscription to a mutual fund are not collective investment schemes, even though funds are pooled and professionally managed.

  1. AIt is excluded, as contributions in the nature of subscription to a mutual fund are not a CISCorrect
  2. BIt is a CIS because the funds are pooled and managed for investors
  3. CIt is a CIS only if the corpus exceeds Rs 100 crore
  4. DIt is a CIS unless the Central Government notifies otherwise for that fund

Explanation

Section 11AA(3)(viii) says that a scheme under which contributions are in the nature of subscription to a mutual fund shall not be a collective investment scheme, even if the sub-section (2) conditions seem satisfied. Mutual funds are regulated separately. Option B ignores this exemption, and the Rs 100 crore proviso applies only to arrangements not covered under sub-section (3).

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