Collective Investment Scheme: 10 Things To Know Before Investing

Collective Investment Scheme (CIS) is a type of scheme where the contributions, or payments made by the investors, are pooled with a view to receive profits, income. This scheme is managed on behalf of the investors is a CIS.

A company can raise money under this scheme only after registration with SEBI and obtaining a credit rating for its scheme.

Here are 10 things to check before investing:

1. SEBI will not guarantee or undertake the repayment of money to the investors.

2. Check the credit rating of the scheme and tenure of the rating.

3. The investor along with annual report are entitled to receive a copy of the Balance Sheet, Profit and Loss account and a copy of the summary of the yearly appraisal report from CIMC within two months from the closure of the financial year.

4. Investors should not invest in any CIS entity which is not registered with SEBI.

5. Do not decide the scheme based on the indicative returns provided by the company.

6. Unit certificates have to be compulsorily listed on the Stock Exchanges as mentioned in the Offer document.

7. Check for the promise vis-a-vis performance of the earlier schemes in the offer document
8. Ensure that the Collective Investment Management Company has the necessary infrastructure to carry out the scheme.

9. Ensure clear and marketable title of the property/assets of the entity.

10. Read the offer document of the scheme especially the risk factors carefully.

Source: SEBI