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CS Executive · Capital Market and Securities Laws · Mutual Funds

Meridian Wealth Pool collects money from many investors, pools it, and has it managed on their behalf. The investors have no day-to-day control, and they contribute to receive profits. The contributions are in the nature of subscription to a mutual fund registered with SEBI. Under Section 11AA of the SEBI Act, how is this arrangement treated?

It is not a collective investment scheme. Section 11AA(3) excludes schemes where contributions are in the nature of subscription to a mutual fund, even though the pooling conditions of sub-section (2) would otherwise be satisfied. Mutual funds are regulated separately under their own regulations.

  1. AIt is a collective investment scheme because all four pooling conditions are met
  2. BIt is not a collective investment scheme because subscription to a mutual fund is expressly excludedCorrect
  3. CIt is a collective investment scheme only if the corpus is one hundred crore rupees or more
  4. DIt is a collective investment scheme unless the Central Government has notified it

Explanation

Section 11AA(3)(viii) says that, despite the pooling conditions, a scheme under which contributions are in the nature of subscription to a mutual fund is not a collective investment scheme. The four conditions are therefore not decisive here. The corpus threshold in the proviso applies only to unregistered pooling not otherwise covered by sub-section (3).

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