CS Executive · Capital Market and Securities Laws · Mutual Funds

Ravi Trust Fund pooled Rs 150 crore from investors in an arrangement not registered with SEBI and not covered under the exempted categories in Section 11AA(3). Under Section 11AA of the SEBI Act, 1992, how is this arrangement treated?

The arrangement is deemed to be a collective investment scheme. The proviso to Section 11AA(1) deems any unregistered pooling of funds, not covered by the exemptions in sub-section (3), with a corpus of one hundred crore rupees or more to be a collective investment scheme. Here Rs 150 crore crosses that threshold.

ADeemed to be a collective investment scheme under the provisoCorrect
BTreated as a mutual fund scheme since funds are pooled
CNot a collective investment scheme because the corpus exceeds Rs 100 crore
DExempt because investors have no day-to-day control

Explanation

The proviso to Section 11AA(1) deems any unregistered pooling of funds not covered under sub-section (3) with a corpus of Rs 100 crore or more to be a collective investment scheme. Rs 150 crore exceeds the threshold. Lack of day-to-day control is one of the conditions defining a CIS, not an exemption. Mutual fund subscriptions are exempt only when made in a mutual fund.

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Ravi Trust Fund pooled Rs 150 crore from investors in an arrangement not registered with SEBI and not covered under the exempted categories in Section 11AA(3). Under Section 11AA of the SEBI Act, 1992, how is this arrangement treated?

Explanation

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