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

Sunrise Agro Pvt Ltd in Nashik invites the public to contribute money to a plantation scheme. The contributions are pooled, the pooled property is managed on behalf of the contributors, and the contributors receive produce as returns. Which further feature is needed under Section 11AA(2) of the SEBI Act for the arrangement to be a collective investment scheme?

The missing element is that investors must not have day-to-day control over the management and operation of the scheme. Section 11AA(2) requires this along with pooling, expectation of returns and management on behalf of investors. Listing or a minimum corpus is not a condition for the definition.

  1. AThe investors do not have day-to-day control over the management and operation of the schemeCorrect
  2. BThe scheme must be listed on a recognised stock exchange
  3. CThe corpus must be at least Rs 500 crore
  4. DThe scheme must be offered only by a company

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 investors lacking day-to-day control. Only the lack of day-to-day control is missing here. Listing, a Rs 500 crore corpus and a company-only offeror are not conditions; the offeror can be any person.

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