Collective Investment Scheme

A Collective Investment Scheme is an investment form in which different investors come together to achieve exposure to a diversified pool of assets. The main objective of the CIS, in general, is consolidating resources through which exposure to various investment avenues, not otherwise accessible, may be attained by individual investors. In a CIS, the collective funds are delegated to different professional fund managers who make the investment decisions on behalf of the scheme, based on the objectives established for the scheme. The standard models of CIS include mutual funds, unit trusts, and exchange-traded funds.

Investors invest directly in the scheme by buying shares or units, representing the individual's ownership in the overall portfolio. These investments come back to the investors, through dividends, interest, and capital gains, in the exact proportion to the number of units or shares held. The value of those units or shares varies accordingly with the underlying performance. CIS is governed by financial regulators to keep in check the proper management and transparency.

• The applicant is set up and registered as a company under the Companies Act, 1956
• Applicant has, in its Memorandum of Association specified the managing of collective investment scheme as one of its main objects;
• The applicant has a minimum net worth of rupees 5 crores
• However,  at the time of making the application the applicant should have a minimum net worth of INR 3 crores which shall be increased to rupees five crores within three years from the date of approval of registration;
• Applicant is a fit and proper person for the grant of such a certificate;
• Applicant has adequate infrastructure to enable it to operate a collective investment scheme in accordance with the provision of these regulations;
• Directors or key personnel of the applicant shall consist of persons of honesty and integrity having adequate professional experience in related field and have not been convicted for an offence involving moral turpitude or for any economic offence or for the violation of any securities laws;
• Minimum fifty percent of the directors of such Collective Investment Management Company shall consist of persons who are independent and are not directly or indirectly associated with the persons who have control over the Collective Investment Management Company;
• No individual, directly or indirectly connected with the applicant has in the past been refused registration by the Board under the Act.

1. And the Corpseed team will help you get the registration of Collective Investment Management Company.
2. Some condition needs to be followed by a collective investment management company:
3. There has to be a minimum capital requirement (that is 3 crore initially which will grow to 5 crores in next 3 year from incorporation)
4. It has prescribed certain corporate governance in the company.
5. Independent director should be 50% of the total numbers of director.
6. There should be a trust
7. The trustee and directors should be a fit and proper person (they have to be approved by the SEBI board)
8. The type if the investment that they can make that has been prescribed along with the restriction on activities of collective investment Management Company.

Appointment of Trustee

A Collective Investment Management Company shall appoint a trustee who shall hold the assets of the collective investment scheme for the benefit of unitholders.

Eligibility for Appointment as a Trustee.

Persons registered with the Board as Debenture Trustee under Securities and Exchange Board of India (Debenture Trustee) Regulations, 1993 shall be qualified to be chosen as trustees of the collective investment scheme.

Provided that no person shall be eligible to be appointed as trustee if he is directly or indirectly associated with the persons who have control over the collective investment management company.

The Collective Investment Management Company shall furnish to the Board particulars as specified in Form C in respect of trustees appointed.

• Diversification: The money is pooled from various investors in CIS. It, therefore enables investment in a diversified portfolio of assets. The diversification across different securities, sectors, and asset classes reduces the risk.
• Professional Management: Fund managers are essentially professionals who, on behalf of the investors, make the investment decisions. The potential to generate better returns is higher unlike in the case of individual investing by people who cannot find the time or learn the art of managing investments themselves.
• Accessibility: CIS gives more and better avenues to the average man for commencing investment, even on small amounts of capital. This now means that anyone has a lesser barrier to entry, who otherwise might not have had enough capital to diversify their portfolio.
• Liquidity: Most of the CIS are reasonably liquid, in particular open-ended funds and ETFs, in that investors can buy and sell their holdings at any one time without facing too much difficulty, usually at market price. The result is that the investor has substantial flexibility for those investors who might need quick access to their funds.
• Economies of Scale: As the resources are pooled, CIS can gain economies of scale. This may ultimately lower per-unit transaction costs compared to individual investors carrying out trades independently.
• Transparency: Most CISs are required to publish regular reports and disclosures concerning their holdings, performance, and fees charged. This works to improve transparency for the investors.
• Regulatory Presence: CIS is generally provided with some type of oversight by financial regulators concerning protection for investors. These regulations are typically aimed at ensuring that such funds are brought up to particular standards regarding conduct, financial reporting, and protection for investors.
• Convenience: the investment process may be simpler by investing in a CIS, as the fund manager needs to decide on asset allocation and rebalancing, among other investment decisions. This is convenient for investors who would not like to be directly involved in their investment matters.

• Regulatory Compliance and Licensing

This is the very first step in setting up a CIS - understanding the regulatory environment in which one is operating. Obtain the requisite licenses from various financial regulators such as securities commissions, and select the legal form for the fund - mutual fund, unit trust, or investment partnership- whatever the laws and regulations allow.

• Forming the CIS

Once secured, draft detailed offering documents, such as a prospectus or offering memorandum, to include in-depth investment strategy, risks, fees, and other basic information. Gather a team of skilled fund managers and appoint custodians and fund administrators for good asset management and operations.

• Marketing and Fundraising

Develop an appropriate marketing strategy that may include attracting investors through marketing materials, informational seminars, and digital channels. Additionally, create an easy and transparent subscription process with clear instructions to the method of participation.

• Investment and Portfolio Management

Execute an investment program; manage the investments in concert with the attainment of objectives of the fund, but also attend to risks. The portfolio should be under regular monitoring and, when necessary, changed in line with the goals and risk tolerance of the fund.

• Ongoing Management and Reporting

Regular valuation of assets and reporting to investors. Compliance with regulatory requirements using ongoing reporting and disclosures.

• Distribution and Redemption

Efficiently manage all housekeeping matters given distribution and redemptions in concert with the terms of offering documents and allowing for smooth withdrawals by investors.

• Review and Adjustment

Have the CIS, from time to time, reviewed and adjusted so that it may remain effective and within the bounds set by evolving regulations.

• Termination or Winding Up

If the CIS is to be terminated, liquidate the assets and distribute the proceeds to investors then wind up in terms of regulators.

We at Corpseed can facilitate the Collective Investment Schemes by offering our consultancy services in regulatory compliance matters and also assist in documentation and application processes. Our services ensure efficiency in fund management, and adherence to legal standards attracts investors by assuring smooth functioning of an operational framework.