Do’s and Don’ts in dealing with collective Investment scheme

Collective Investment scheme (CIS): SEBI has defined collective Investment scheme that .Any scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilized with a view to receive profits, income, produce or property, and is managed on behalf of the investors is a CIS. Here in this post, we enumerate the Do’s and Don’ts while taking investments decisions in the context of Collective Investment scheme (CIS).

Do’s in dealing with collective Investment scheme:

  • Ensure that the entity operating Collective Investment scheme (CIS) has registered with Securities and Exchange Board of India (SEBI)
  • Check in the website of SEBI to ensure the validity of entity’s registration certification
  • Read the offer document of the scheme carefully. Don’t overlook any information that is disclosed therein. Especially the risk factors.
  • Ensure that you have read and understood the objectives of the scheme.
  • Check the if the project is viable where the investment is going to be made under CIS
  • Check and enquire about the back ground of the promoters. Don’t just go blindly with the scheme just because it is promoted by reputed individuals/entities.
  • Ensure that the schemes launched by the company have been compulsorily credit rated as well as appraised by an appraising agency.
  • Ensure that the title of the collective investment management company over the project assets is clear and marketable.

Do's in dealing with collective Investment scheme

  • Ensure that the infrastructure of the Collective Investment Management Company is enough to carry out the project.
  • In case the Collective Investment Management Company has already carried many schemes in the past, check out their historical ‘promise vis-a-vis performance’ of the old schemes.
  • Ensure that Collective Investment Management Company has not made any defaults in the past and go through the previous annual reports filed by them with SEBI.
  • Refer the frequently asked questions on CIS compiled by SEBI at below URL

http://www.sebi.gov.in/sebi_data/faqfiles/jan-2017/1485846814724.pdf

Don’ts in dealing with collective Investment scheme:

  • Don’t invest in the CIS that has not yet registered with SEBI. If the registration is under process, wait till the certificate is displayed in SEBI’s website.
  • Don’t get carried away by the luring advertisements carried out by the promoters
  • Don’t invest in based on what you hear in the market. Make your own judgment or consult a qualified professional for advice.
  • Don’t sign any blank documents.
  • Don’t invest in a scheme that is possibly on the verge of winding up.
  • Don’t fail to write to SEBI in case of no response from the CIS within a reasonable time for grievance redressal.

Don'ts in dealing with collective Investment scheme