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

Sunrise Pooled Holdings, an unregistered entity, pools Rs 120 crore from investors under an arrangement that is not covered by the exclusions in Section 11AA(3). Under the proviso to Section 11AA(1), what is the position?

It is deemed to be a collective investment scheme. The proviso to Section 11AA(1) deems any unregistered pooling arrangement not covered by sub-section (3), with a corpus of one hundred crore rupees or more, to be a collective investment scheme, regardless of whether the four conditions are separately proved.

  1. AIt is deemed to be a collective investment scheme because the corpus is one hundred crore rupees or moreCorrect
  2. BIt is a collective investment scheme only if investors lack day-to-day control
  3. CIt is outside the Act because it is unregistered
  4. DIt is a mutual fund by default

Explanation

The proviso deems any pooling of funds under a scheme that is not registered with SEBI and not covered by sub-section (3), involving a corpus of Rs 100 crore or more, to be a collective investment scheme. Rs 120 crore exceeds the threshold and no exclusion applies. Lack of registration does not take it outside the Act.

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