SEBI (Collective Investment Scheme) Regulations, 1999 came into force on October 15, 1999. As per Regulation 5(1), any person who immediately prior to the commencement of these regulations was operating a Collective Investment Scheme, shall subject to provisions of Chapter IX of these regulations, make an application to SEBI for the grant of certificate of Registration within a period of two months from the date of notification (i.e. October 15, 1999). Thus, all existing Collective Investment Scheme entities are, subject to provisions of Chapter IX of these regulations, required to apply for registration by December 14, 1999. As per Regulation 74 an existing scheme not desirous of obtaining registration shall repay the investors in the manner specified in Regulation 73.

As per Regulation 73(1) an existing Collective Investment Scheme which has failed to make an application for registration to SEBI; or has not been granted provisional registration by SEBI; or having obtained provisional registration fails to comply with the provisions of Regulation 71; shall wind up the existing scheme and repay the investors.

Under Regulation 73(2), the existing Collective Investment Scheme shall send an information memorandum to the investors who have subscribed to the schemes, within two months from the date of receipt of intimation from SEBI. The information memorandum shall contain the details of the state of affairs of the scheme, the amount repayable to each investor and the manner in which such amount is determined.

Recently, SEBI had sent notices, under registered post, calling for details, from all the 642 entities who had earlier filed information with SEBI in response to its public notice dated 18.12.1997. Out of these, several notices were returned undelivered by postal authorities with remarks "left/not known". Subsequently, SEBI had sent registered letters to these entities informing them about the coming into force of SEBI (Collective Investment Schemes) Regulations, 1999 and their duty to comply with these Regulations. Many of these notices are also being returned undelivered.

As such, this public notice is being issued calling upon them to comply with the provisions of Regulation 5(1), 73 and 74 of SEBI (Collective Investment Schemes) Regulations 1999 for registration, winding up the scheme and repayment to the investors, etc. failing which penal action under the provisions of SEBI Act 1992, Regulations made thereunder, and other laws will be initiated. It may include the following:

1. Directions under Section 11B of SEBI Act, 1992 and Regulation 65 of SEBI (Collective Investment Schemes) Regulations, 1999 in the interests of investors. Such directions may entail :

1. requiring the person concerned not to collect any money from investors or to launch any scheme;
2. prohibiting the person concerned from disposing of any of the properties of the scheme acquired in violation of these regulations; it may also be noted that in terms of the interim orders of the Hon'ble High Court of Delhi in CWP 3352/98 companies running Collective Investment Schemes are restrained from selling, disposing of and / or alienating their immovable properties or parting with the possession of the same. The directors of these companies are also interdicted from transferring their immovable properties in any manner. They shall also not part with the possession thereof.
3. requiring the person concerned to dispose of the assets of the scheme in a manner as may be specified in the directions;
4. requiring the person concerned to refund any money or the assets to the concerned investors along with the requisite interest or otherwise, collected under the scheme;
5. prohibiting the person concerned from operating in a capital market or from accessing the capital market for a specified period.

1. Initiation of prosecution under Section 24 of SEBI Act, 1992 which prescribes imprisonment for a term which may extend to one year, or with fine, or with both.
2. In case of offences by the companies, the persons who are in charge for the conduct of the business of the company as well as the company, its directors, managers, secretary or other officers are liable to be proceeded against and punished under Section 27 of SEBI Act, 1992.

Although separate notices have been sent to all these existing Collective Investment Scheme entities, this notice shall be treated as an individual notice to all the entities running Collective Investment Scheme in terms of the Regulations calling upon them to comply with the provisions of SEBI (Collective Investment Schemes) Regulations, 1999 failing which action will be initiated under the provisions of SEBI Act, 1992, Regulations made thereunder and other laws.
 
 

MUMBAI                                 SECURITIES AND EXCHANGE BOARD OF INDIA

DECEMBER 10, 1999