sebi:WTM/PS/85/IMD-CIS/NOV/2015
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Facts / Headnote
Held Fund I and Fund II are unregistered Collective Investment Schemes in contravention of Section 12(1B) read with Sections 11 and 11AA and Regulation 3 of CIS Regulations; directed Yatra Art Fund to abstain from CIS activity, refund investments with 10% p.a. interest, submit asset inventory, and restrained from securities market for 4 years with extended restraint till refund.
Provisions invoked
- s. 11A
- s. 11
- s. 19
- s. 11(1)
- s. 12
- s. 11(2)
- s. 2(1)
Regulations
- Reg. 65
- Reg. 3
- Reg. 5
- Reg. 2(1)(t)
- Reg. 2(z)
Parties
- Yatra Art Fund
Holding
Yatra Art Fund I and Fund II satisfy all four conditions under Section 11AA(2) and are Collective Investment Schemes operated without registration in violation of Section 12(1B) and Regulation 3 of the CIS Regulations. Yatra was directed to cease CIS activity, refund monies with 10% per annum interest, and was restrained from the securities market for four years.
Full text
Page 2 of 32 Section 11AA of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') and found that Yatrawas carrying out such activities without obtaining a certificate of registration in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999 (hereinafter referred to as 'CIS Regulations'). Subsequently, SEBI vide letter dated June 18, 2007, called upon Yatra to explain as to why appropriate
Page 3 of 32 subscribe. The investment were accepted from limited number of identified sophisticated, high net worth contributors on private placement basis. f. The „Fund I‟ has not issued any offer document to the general public. It had furnished the Confidential Private Placement Memorandum (hereinafter referred to as 'Memorandum') to the selected contributors.The memorandum had also stated that the fund is not regulated by any regulatory authority in India. g. For investing in the „Fund I‟ the contributor had to enter into a contribution agreement with the trustees of the fund. The agreement had contained that the contributor understands that the „Fund I‟ is an unregulated pool, units will not be repurchased or redeemed at any time before the redemption and the units cannot be freely transferable or sold. h. There was no company/ body corporate involved in the fund either as a sponsor/ offerer/ promoter/ trustee of the fund. The settlors, sponsors, trustees and manager of the „Fund I‟were all individuals. In view of the same, it will not constitute a CIS as defined in Section11AA(2) read with Section 2(ba) of the SEBI Act. Therefore, the question of requiring the „Fund I‟ to register with SEBI as a CIS does not arise. i. The legislative intent of the introduction of Section 11AA and Section 2(1)(ba) to SEBI Act was to regulate the CIS offered or made by the companies more particularly the plantation companies. Further, the CIS Regulations are not applicable to any schemes
Page 4 of 32 4. On consideration of the reply of Yatra, SEBI issued a show cause notice (hereinafter referred to as 'SCN') dated October 12, 2007 and called upon Yatra to show cause as to why it should not be registered with SEBI as a Collective Investment Management Company and in case of failure to do so, refund the moneys collected under the scheme/ funds floated/ managed by it within a period of 30 days. It was also stated that in case no reply was received within the aforesaid period, it shall be assumed that it did not have any
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Source: SecMarx — sebi:WTM/PS/85/IMD-CIS/NOV/2015. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.