SEBI amends CIS regulations

SEBI amends CIS regulations

The Securities and Exchange Board of India (SEBI), in its quarterly board meeting held at the end of March, amended regulations governing collective investment schemes (CIS) to bring them on a par with mutual fund regulations. The SEBI hopes this move will help remove the regulatory arbitrage between the two pooled investment vehicles. CIS allows a group of people to pool money into an asset, the returns of which are divided based on the proportion of investments made.

Among the key changes to the CIS regulations, the SEBI has approved enhancing the minimum net worth requirement and introducing a clause for having a track record in the relevant field for setting up a CIS.

In addition, cross-shareholding norms have been introduced whereby shareholders cannot hold more than a 10% stake in more than one collective investment management company, or have representation on their boards.

The regulator said that the investment of a collective investment management company and its employees was mandatory in collective schemes to align their interests with that of the CIS. It is also necessary to have a minimum number of investors at the CIS level.

Among other key changes made are the rationalisation of fees and expenses to be charged to a scheme, and reduction of timelines for the offer period of a scheme, allotment of units and refund of money to investors.