History of CIS in India

In 1990s there were various instances of collection of money by numerous agro-based

and plantation companies, which eventually failed to provide any return on the
investments (despite promising around 18-30% returns) including the repayment of
principal amount. In this context, the Government of India, vide its press release dated
November 18, 1997, decided that an appropriate regulatory framework for regulating
entities which issue instruments like agro bonds, plantation bonds etc., will be put in
place. The government decided that the schemes through which such instruments are
issued would be treated as "Collective Investment Schemes" (CIS) coming under the
provisions of the SEBI Act.
Accordingly, SEBI vide its press release dated November 26, 1997 and December 18,
1997, prohibited collective investment schemes from sponsoring any new scheme till
the CIS regulations are notified. The press releases further stated that instruments such
as agro bonds, plantation bonds would be treated as CIS coming under the SEBI Act,
1992. All the companies having such activities were required to file information with
SEBI. Moreover, general public was also informed that no person can sponsor or cause
to be sponsored any new collective investment scheme and thereafter raise further
funds.
Meanwhile, a committee was formed under Dr. S.A. Dave to examine and finalize the
draft regulations for CISs. The committee submitted its report on 5th April 1999.
Subsequently, the notification of SEBI (Collective Investment Schemes) Regulations
1999 was issued on October 15, 1999. As per the CIS regulations, any person who has
been operating a Collective Investment Scheme at the time of commencement of the
CIS Regulations was required to make an application to SEBI for the grant of registration
under the provisions of the Regulation, within a period of two months from the date of
the notification. In case, such an application is rejected, the entity was required to wind
up its existing schemes in the manner as specified in the Regulations. No entity was / is
allowed to run a CIS scheme without obtaining the Certificate of Registration from SEBI.
In 2013, in the backdrop of Sahara / Sharada scams, SEBI modified the definition of CIS
to include any scheme / arrangement floated by any person (instead of a company as
was defined earlier); and any such scheme with corpus of more than Rs. 100 Crore shall
also be deemed to be a CIS by SEBI

Securities and Exchange board of India (Collective

Investment Schemes) Regulations, 1999
Some of the definitions

Certificate means a certificate of registration granted under regulation 10 of these regulations;

Collective Investment Management Company means a company incorporated under the Companies
Act, 2013 and registered with the Board under these regulations, whose objective is to organize, operate
and manage a collective investment scheme;

Offer document means any document by which applications for subscribing to units of the scheme are
invited from the public;

Trustee means a person who holds the property of the collective investment scheme in trust for the
benefit of the unit holders, in accordance with these regulations;

Unit includes any instrument issued under a scheme, by whatever name called, denoting the value of the
subscription of a unit holder; and

Unit holder means a person holding a unit in a scheme.