INDEX 1. Collective Investment Scheme a. History of CIS . . . . . 1 b. Development of CIS . . . . . 2 c. Definition and CIS participants . . . . . 3 d. Benefits of CIS . . . . . 5 e. Disadvantages of CIS . . . . . 6 f. Different kind of CIS in the Market . . . . . 6 g. Schemes not treated as CIS . . . . . 8 h. Collective Investment Management Company . . . 11 i. Eligibility Criteria for CIS Registration . . . . 14 j. Governance of CIS . . . . . 16 2. Ponzi Scheme a. Characteristic of Ponzi Scheme . . . . . 21 b. Case Studies i. SPEAK ASIA, 2010 . . . . . 23 ii. GOLDSUKH, 2011 . . . . . 23 iii. ABHINAV GOLD, 2011 . . . . . 24 iv. SHIVRAJ PURI from CITIBANK INDIA, 2011 . . . 24 v. EMU FARMING, 2012 . . . . . 25 vi. THE SAHARA CASE, 2010 . . . . . 25 vii. THE SARADHA CASE . . . . . 27 3. Mutual Funds a. Introduction . . . . . 29 b. Early History . . . . . 29 c. Growth and Development in India . . . . 33 d. Concept of Mutual Fund . . . . . 34 e. Structure of Mutual Fund . . . . . 39 f. Advantages of Mutual Fund . . . . . 42 g. Disadvantages of Mutual Fund . . . . . 43 h. Regulation of Mutual Fund . . . . . 46 i. Offer Document . . . . . 53 j. Statement of Additional Information . . . . 60 k. Difference between CIS and Mutual Funds . . . 62 4. Chit Funds a. Origin and History of Chit Fund . . . . . 64 b. Evolution of Chit Fund . . . . . . 65 c. How do they work? . . . . . . 66 d. Chit Funds- Over the world . . . . . 68 e. Advantages of Chit Funds . . . . . 70 f. Case Study- Rose Valley Scam . . . . . 71 g. Difference between Mutual Funds and Chit Funds . . 72 h.

1. Group NO. 3
Vinay Kumar Elegeti 16106A1045
Pritee Khade 16106A1047
Tejshree Manore 16106A1049
Manish Tiwari 16106A1051
Ashish Thakur 16106A1054
Kiran Agarwal 16106A1058
Nikhil Balai 16106A1059

3. Collective Investment Scheme (CIS)
A Collective Investment Scheme (CIS), is an investment scheme wherein several
individuals come together to pool their money for investing in a particular asset(s)
and for sharing the returns arising from that investment as per the agreement
reached between them prior to pooling in the money.
Regulated by: -
“SEBI (Collective Investment Schemes) Regulations, 1999” for the regulation of CIS.

4. Development Collective investment scheme In India
CIS is not a new phenomenon for India.
Investor collect money and invest primarily in agro-related activities.
Large scale miss-utilization of funds fraudulent activities lead to establishing a regulated system for the operation of CIS.
The Government of India, on November 18, 1997, decided that an appropriate regulatory framework for regulating schemes
through which instruments like agro- bonds, plantation bonds etc. are issued, has to be put in place and decided that the as
“Collective Investment Schemes” coming under the provisions of the SEBIAct
The preliminary report and regulations were released by SEBI to the public on December 31, 1998. Dave Committee founded
to be appropriate for the transparent working of CISs were incorporated in the Final Report dated April 5, 1999.
Section 11AA was added to the SEBIAct and the CIS Regulations were framed.
One of committee recommendation: -
CIS shall be constituted in the form of a trust
Instrument of the trust shall be in the form of a deed registered under the provisions of the Indian Registration Act, 1908 and
executed by the Collective Investment Management Company (CIMC) in favor of the trustees named in such an instrument.

5. CIS Participants
• Collective Investment Management Comp
• Trustee
• Fund Manager or Investment Manager
• Shareholders or Unitholders

6. Advantage of Collective Investment Schemes (CIS)
• Affordability
• Accessibility
• Diversification
• Scope for good return
• Professional Investments Management
• Liquidity
• Safety &Transparency

7. Disadvantages of a collective investment scheme
Paying for a
fund manager
Lack of choice
Loss of owner's
rights

8. Different Kinds of Collective Investment Schemes Available inThe Market

9. Section 11AA of the SEBI Act, 1992
A Collective investment scheme is any scheme or arrangement, which satisfies the conditions, referred to in sub-section
(2) of section 11AA of the Securities and Exchange Board of India Act, 1992 (SEBI Act).
The following conditions:
IThe contributions, or payments made by the investors, by whatever name called, are pooled and utilized solely for the
purposes of the scheme or arrangement
ii.The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits,
income, produce or property, whether movable or immovable, from such scheme or arrangement
iii.The property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is
managed on behalf of the investors
iv.The investors do not have day to day control over the management and operation of the scheme or arrangement.
Note: -
The Securities Laws (Amendment) Act, 2014- any pooling of funds under any scheme or arrangement, which is not
registered with SEBI, involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective
investment scheme.

10. Schemes not treated as CIS
• Scheme offered by a co-operative society
• Scheme under which deposits are accepted by non-banking financial companies
• Any scheme or arrangement being a contract of insurance to which the InsuranceAct,
applies
• Scheme such as, Pension Scheme or the Insurance Scheme framed under the Employees
Provident Fund and Miscellaneous ProvisionsAct, 1952
• Scheme under which deposits are accepted by a company declared as a Nidhi or a mutual
benefit society under section 620A of the CompaniesAct, 2013

11. Collective Investment Management Company
Intro : -
A Collective Investment Management Company, incorporated under the provisions of the Companies Act, 2013 and
registered with SEBI under the SEBI (CIS) Regulations, 1999, to organize, operate and manage a Collective Investment
Scheme.
Circumstances under which a company registered as a Collective Investment
Management Company can raise funds from the public
• A registered CIS is eligible to raise funds from the public by launching schemes.
• Schemes have to be compulsorily credit rated as well as appraised by an appraising agency.
• The schemes also have to be Approved by theTrustee and contain disclosures, as provided in the Regulations
• A copy of the offer document of the scheme has to be filed with SEBI
• Company is entitled to issue the offer document to the public for raising funds from them.

12. Circumstances under which an existing Collective Investment Scheme be wound up
 An existing collective investment scheme which failed to make an application for registration
 Not desirous of obtaining provisional registration
 Not been granted provisional registration
 Having obtained provisional registration fails to comply with the provisions as laid down in the Regulations
 On the expiry of duration specified in the scheme or on the accomplishment of the purpose of the scheme.
 If in SEBI’s opinion the continuation of the scheme would be prejudicial to the interest of the unitholders, then the
scheme can be wound up.

13. Eligibility Criteria for CIS Registration
The board shall not consider an application for the grant of a certificate unless the applicant satisfies the
following condition: -
1-The applicant is set up and registered as a company under the Companies Act, 2013
2-The applicant has, in its Memorandum of Association specified the managing of collective investment scheme as one of its
main objects
3-The applicant has a net worth of not less than rupees five crores at the time of making the application
4- The applicant shall have a minimum net worth of rupees three crores which shall be increased to rupees five crores within
three years from the date of grant of registration
5-The applicant has adequate infrastructure to enable it to operate collective investment scheme in accordance with the
provision of these regulations

14. 6-The directors or key personnel of the applicant shall consist of persons having adequate professional experience in
related field
7- Have not been convicted for an offence involving moral turpitude or for any economic offence or for the violation of any
securities laws
8- At least fifty per cent of the directors of such Collective Investment Management Company shall consist of persons who
are independent and are not directly or indirectly associated with the persons who have control over the Collective
Investment Management Company;
9- No person, directly or indirectly connected with the applicant has in the past been refused registration by the Board
under the Act.

15. Governance of collective investment schemes (cis)
Collective Investment Schemes (CIS) have been one of the most significant developments in financial
intermediation during the past few decades.
This Note covers Five areas:
Legislative and
Regulatory
Framework
Rights of Investors The Role of the
Private Sector
The Internal
Governance of the CIS
Transparency and
Disclosure
(CIS) that are
promoted to the
investing public
should be required to
operate through a
recognized legal and
regulatory framework.
In india CIS are
operated as per the
guidelines provided by
SEBI
Basic Rights : -
• Insolvency
• key issues related
to the CIS
• use funds in
companies in which
it has invested.
• Treat all investor
class equally
Right to exit
Industry
Associations, Self-
Regulatory
Organizations and
Firms
Responsibilities of
Distributors and
Financial Advisers
Governance Structure
Conflicts of Interest
Custody andValuation
of Assets
Internal Policies,
Controls and
Compliance
Independent Review
The Prospectus and
Periodic Reports
Fees, Commissions
and Expenses

16. COLLECTIVE INVESTMENT SCHEMES OF COLLECTIVE INVESTMENT MANAGEMENT COMPANY
No guaranteed returns

Disclosures in the offer
document

Advertisement material
Appraising Agency

Misleading Statements
Offer period
Allotment of Units and
refunds of moneys Money to
be kept in separate account
and utilization
Investments and
segregation of funds
Listing of collective
investment schemes
Winding up of collective
investment scheme

17. GENERAL OBLIGATIONS
•To maintain proper books of account and records, etc.
• Financial year
• Dispatch of warrants and proceeds
• Statement of Accounts and Annual Report
• Auditor’s Report
• Publication of Annual Report and summary thereof
• Periodic and continual disclosures
• Quarterly disclosures
• Disclosures to the investors
• Calling of meeting of unit holders, transfer and transmission of units

18. EXISTING COLLECTIVE INVESTMENT SCHEMES
Any person who has been operating a collective investment scheme at the time of
commencement of these regulations shall be deemed to be an existing collective
investment scheme and shall also comply with the provisions of the securities and
exchange board of india (collective investment schemes) regulations, 1999.

19. Ponzi
Scheme

20. PONZI SCHEME
• A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their
own money or the money paid by subsequent investors, rather than profit earned by the
organization.
• Offering investment products with extreme high returns in investments that actually don’t exist.
• They don’t invest the money, but pay the promised returns with the investors own money.
• The money of new investors is being used to pay the old investors.

21. Key Elements to Investment
. Consistent returns
. High Investment return with no risk or little risk
. Unregistered investments
. Unlicensed sellers
. Difficulty in receiving payments.

22. PONZI SCHEME SCAMMER
THE
SARADHA
CASE
THE SAHARA
CASE

23. The Saradha Case

24. SARADHA GROUP
• Key People
• Sudipto Sen
• Originally a financial concern but invested heavily in
brand building.
• Bengali film industry
• Local television channels
• Newspapers

25. Scam
• Started in 2006 with promises of astronomical returns in Ponzi Schemes. Started building
brand by buying and selling media channels
• Used nexus of companies for money laundering
• Collected money by using secured debentures and redeemable preferential bond
• SEBI challenged them for the first time in 2009
• Creation of more than 300 new companies

26. Cont’d
• SEBI persisted, in 2010, Saradha’s method of raising funds changed
• Collective Investment Schemes like tourism packages, real estate fund launched in the name of
Chit Fund
• In 2011, SEBI warned West Bengal government about the alleged schemes of the company as the
concept of chit fund is regulated by state governments and not by SEBI
• In 2012, SEBI identified that the group operated CIS and not Chit Fund.
• Saradha group started trading in stock market and siphoning off the proceeds

27. Action Taken
7 Dec. 2012
On 7 December 2012, RBI
governor stated that the
West Bengal government
should initiate suo motu
action against companies
which were indulging in
financial malpractices.
Apr. 2013
Sudipto Sen, wrote a
confessional letter to CBI
in April 2013 and fled. He
was later arrested.
22 Apr. 2013
PIL was filed on 22nd April
2013 in Guwahati High
Court and Calcutta High
Court CBI investigation
started
Currently
He is in jail in Kolkata.

28. The Sahara Scam

29. Sahara Group

30. SEBI Action
• K M Abraham (IAS OFFICER) passed an order dated
23rd June, 2011 directing the two companies to refund
the money so collected to the investors
• Restrained the promoters of the two companies Sahara
India Real Estate Corporation, Sahara Housing
Investment Corporation including Mr. Subrata Roy
from accessing the securities market till further orders.
• Sahara then preferred an appeal before Securities
Appellate Tribunal (SAT) against the order.
• SAT confirmed and maintained the order of the Whole
Time Member by an order dated 18th October, 2011.
• Subsequently Sahara filed an appeal before the
Supreme Court of India against the SAT order.

31. • Supreme Court-directed refund of Rs 24,000 crore to an estimated three crore investors.
• Finally, Supreme court of India passed the judgment in favor of SEBI.
• Ordered Sahara to repay the Rs24000 cr with 15% interest.
• Supreme Court allowed Sahara to pay whole amount in three instalments
• 120 crore immediately, 10,000 crore in January 2013 and remaining amount by February
2013
• But by February they failed to pay second and third installment.
• SEBI after getting permission from Supreme Court froze all bank and Demat accounts
and attaches properties of chief Subrata Roy and three directors.
• On October 28 2013, Supreme Court directed Sahara to submit title deeds of properties
worth Rs.20,000 crore to SEBI.

33. Introduction of Mutual Fund
Mutual fund is an investment
programme that pools money from
shareholders and invests in a variety
of securities, such as stocks, bonds
and money market instruments.
Investments in securities are spread
across a wide cross-section of
industries and sectors and thus the
risk is reduced

34. Concept of Mutual Funds:
 A mutual fund is just the connecting bridge or a
financial intermediary that allows a group of
investors to pool their money together with a
predetermined investment objective. The mutual
fund will have a fund manager who is responsible
for investing the gathered money into specific
securities (stocks or bonds). When you invest in a
mutual fund, you are buying units or portions of the
mutual fund and thus on investing becomes a
shareholder or unit holder of the fund.

35. Types of Mutual
Funds Schemes
in India:

36. Regulations of Mutual Funds

37. SEBI
Why ?
• Increase Transparency
• Protects Investors Interests
• Avoid Financial Crime
SEBI (Mutual Funds) Regulations, 1996
Under Section 30 in the Securities
and Exchange Board of India Act,
1992

38. Advertisements of Mutual Funds in various mass media are flooded with variety of ads, enlightening
the people about the benefits of Mutual Funds, as to how it can be a lucrative investment alternate.
First Version “Mutual Fund investments are subject to market risks. Please read offer document carefully
before investing.”
Second Version “Mutual Fund Investments are subject to market risks. Please read the Statement of
Additional Information (SAI) and Scheme Information Document (SID) carefully before investing.”
Current Version “Mutual Fund investments are subject to market risks, read all scheme related documents
carefully.”

39. • Which are the documents they are
talking about?
• Scheme Information Document (SID)
• Statement of Additional Information
(SAI)
• Key Information Memorandum (KIM)
• Monthly Factsheet

40. Why you should read these
documents?
• Date of Issue
• Investment Objectives
• Investment Policies
• Risk Factors
• Information about the scheme
• Past Performance Data
• Fees and Expenses
• Key Personnel
• NAV and Valuation
• Tax Benefit Information
• Penalties and Litigations
• Rights of unit holders
• Redressal mechanism

41. Offer Document

42. Offer Document
Offer document is a document filed by the mutual fund with the regulator , Securities
Exchange Board of India (SEBI).
Scheme Information Document
Statement of Additional
Information

43. Scheme Information Document
(SID)

45. All Mutual Funds should use Form NS for filing an offer document pursuant to sub regulation (1) of Regulation 28 of
the SEBI (Mutual Funds) Regulations, 1996, along with filing fees as specified in the Second Schedule to these
Regulations.
Contents
I. Highlights of the Scheme
II. Introduction
III. Information about the Scheme
IV. Units and Offer
V. Fees and Expenses
VI. Rights of Unit Holders
VII. Penalties, Pending litigations or proceedings

46. • A Statement of Additional Information is a supplementary document to a mutual fund’s
prospectus that contains additional information about the fund and includes further
disclosure regarding its operation.
• Investors generally do not require to go through this document, as the information
contained in the Scheme Information Document provides all the information needed
Statement of Additional Information
(SAI)

48. Contents of the Statement of Additional Information
1. Information about Sponsor, AMC, and Trustee Companies
2. How to Apply
3. Rights of the Unit holders of the Scheme
4. Investment Valuation norms for Securities and other Assets
5. Tax & Legal & General Information

49. Trending topics in Mutual Funds
 Mutual Fund’s Scheme Merger
• A circular for merging mutual fund schemes - G Mahalingam
• Regulator is looking to help investors cut through the clutter of 2,000 investment
schemes
• Number of Schemes will be reduced by half
• The MF industry also needs to work on reducing the expense ratio - Mahalingam.
 Linking Commodities Market with Mutual Funds
• Allowing Mutual Funds and portfolio management services PMS to trade in
commodity services.
• Mr. Mrugank Paranjape, CEO MCX said” We can expect Mutual Funds and PMS
to be allowed to invest in Commodities by the end of this fiscal year. “

50. CHIT FUNDS

51. • A Chit fund is a kind of savings scheme
practiced in India.
• Under which a person enters into an
agreement with a specified number of persons
that every one of them shall subscribe a
certain sum of money (or a certain quantity of
grain instead) by way of periodical instalments
over a definite period and that each such
subscriber shall, in his turn, as determined by
lot or by auction or by tender or in such other
manner as may be specified in the chit
agreement, be entitled to the amount.

52. ORIGIN
A totally Indian concept, the chit fund system has now been globally
operated and won universal acclaim. In the villages of Kerala in
India, many years ago, a small group of farmers operated a unique
scheme.
Each farmer gave a fixed quantity of grains periodically to a selected
trustee. The Trustee, after keeping aside a portion for himself, gave
the rest to a member of the group to help him to meet his social
commitments and other needs.
The farmer who received the lot continued to give the fixed quantity till
every member of the group received his lot. The additional benefits when
receiving the lot earlier led to competition. Some members were even
willing to forgo a certain portion (like a discount) of the lot, in order to get
an earlier chance. So, an auction was held and the lowest bidder got the lot.
This was the basis of what we know today as the “chit fund scheme”

54. TYPES OF CHIT FUNDS
There are three kinds of chit funds:
• Simple Chit
• Business Chit
• Prize Chit

56. KAJAL KUNDU
• Started with hotels & Entertainment then
he also set up Real Estate & Construction.
• In 2002 became a corporate agent of the LIC.
• Kajal Kundu along with his wife and son were
killed in an accident in 2003
GAUTAM KUNDU
• Chairman
• He owned a Bengali newspaper,
a TV channel and a jewellery
chain, among other things.
• He established Rose Valley
Media and Entertainment Wing in
2009.

57. WHAT WAS THE SCAM?
 The Rose Valley Group has been accused of
duping investors of about Rs 17,000 crores in different states.
 SEBI found that the company offered plans with
interest rates ranging from 11.2% to 17.65%.
 The subscription couldn’t be cancelled, and the
investor could not get money back before the end of
the tenure.
 In July 2013, an investigation revealed suspicious expenditure in the profit and loss
accounts of group companies.
 It also revealed erratic “miscellaneous expenditures” with an almost nine fold increase in
losses.
 SEBI found out that the company did not follow due procedures.

58. RESULT
 Kundu was arrested under criminal charges
and provisions of the Prevention of Money
Laundering Act.
 The case was registered in June 2014 for
cheating, breach of trust, criminal breach by
public servant, criminal conspiracy, and
various sections of Prize Chits & Money
Circulation Schemes (Banning) Act, 1978.

60. FACTOR CHIT FUNDS MUTUAL FUNDS
DURATION Monthly periodic
RETURN ON
INVESTMENT
12-16% Higher the risk , higher
the ROI
LIQUIDITY Higher than your paid-
value
Cannot get cash when
required but based on
product performance.
RISK ELEMENT 0% risk due to guarantee
of funds.
100% risk since it is
totally market dependent

62. COLLECTIVE INVESTMENT SCHEME (CIS) MUTUAL FUND
Targeted for retail investors. Targeted for retail investors but majority of
investment are from non-retail investor.
Investment is very low. Minimum investment for Mutual funds is
500/-
Collective Investment Scheme confines its
investments to plantations and real estate.
Mutual Fund invests exclusively in
securities.

63. THANK
YOU