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

Mehta Agro Ventures pools money from many investors to develop plantations. The investors expect to receive produce and profits, the plantation is managed on their behalf by the company, and the investors have no day-to-day control. Under Section 11AA of the SEBI Act, 1992, how is this arrangement classified?

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

  1. AA collective investment scheme, because all the conditions in sub-section (2) are satisfiedCorrect
  2. BNot a collective investment scheme, because it deals with produce rather than securities
  3. CA mutual fund scheme, because contributions are pooled
  4. DNot a collective investment scheme, because investors expect profits only from the company's promoters

Explanation

Section 11AA(2) lists four conditions: 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 met here. Produce is expressly covered, so the second option is wrong.

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