ET in the classroom: All you should know about Collective Investment Schemes

ET gives a lowdown on illegal money-raising activities that keep mushrooming across the country, defrauding investors

1. What are collective Investment Schemes?

CIS refers to any pooling of money more than Rs 100 crore from investors under any scheme or arrangement and which is not registered with market regulator Sebi.

2. How would you identify whether a scheme is genuine?

Till date,only one company — Gift Collective Investment — is registered as CIS with Sebi. Since only one company is registered rest all are considered illegal CIS. Legal experts say clarity will develop gradually when Sebi’s cases will be tested in the courts.

3. As an investor where can you read about CIS?

In two places — the Parliamentary Committee report on CIS and on the Sebi website.

4. What actions did Sebi take?

The regulator has banned these companies from collecting investments and directed them to refund investors.

5. Are the actions by Sebi in the interest of investors?

Investors in such schemes are generally stuck with their money,or plot of land or a piece of art or any such promises made by these companies.However, after these orders by Sebi it is unlikely for investors to get back what was promised by the companies because there is no mechanism to ensure every investors interest.

6. What should investors do?

Investors should be careful while giving their money to any company which promises attractive returns. Any person who promises more than 10 to 12% in any form of asset class should raise a flag.

7. What are some of the prominent CIS cases??

Saradha,Rose Valley, PACL, PGFL and Osian Art Fund.