Sebi extends timeline to submit public comments till Feb 15 on CIS rules

Markets regulator Sebi extended the deadline for submitting public comments till February 15 on a proposal to strengthen the regulatory framework for collective investment schemes (CIS).

Markets regulator Sebi on Monday extended the deadline for submitting public comments till February 15 on a proposal to strengthen the regulatory framework for collective investment schemes (CIS).

The regulator had placed a consultation paper for review of the Sebi (Collective Investment Schemes) rules on its website on January 7 seeking comments by January 31.

Now, it has decided to extend the timeline for submission of comments to February 15, 2022, the Securities and Exchange Board of India (Sebi) said in a notice.

In its consultation paper, Sebi proposed that each CIS should have a minimum subscription amount of Rs 20 crore and each CIS should have a minimum of 20 investors and no single investor should hold more than 25 per cent of the assets under management (AUM) of such scheme.

Currently, CIS rules do not mandate the minimum number of investors, maximum holding of a single investor and minimum subscription amount in any CIS.

CIS is a pooled investment vehicle in closed-ended investment space and the units of the schemes are to be listed on the exchange.

Also, the regulator suggested that Collective Investment Management Company (CIMC) or its promoters should meet certain criteria with respect to the track record and networth.

In addition, the markets watchdog proposed a cap on the cross-shareholding in CIMC to 10 per cent to avoid conflict of interest and recommended that CIS should not be open for subscription for more than 15 days.

The structure of CIS is a two-tier one. There are two entities involved in the process -- CIMC and Trustees. CIMC is created to float and manage a CIS and the trustee is appointed as guardians of funds and assets.

According to Sebi, with no limit on minimum investment by the investor, retail investors are the primary target investor base for CIS.

The CIS Regulations, notified in the year 1999, have not been reviewed since then.

"With a view to removing any regulatory arbitrage among various pooled investment vehicle as available to the retail investors, it is important that the regulatory requirement for CIS as a pooled investment vehicle should be aligned or matched with those for mutual funds," Sebi had said.

The proposals are aimed to strengthen the regulatory framework for collective investment schemes as well as empower CIMC to effectively discharge their responsibilities towards the investors of the schemes.