sebi:WTM/RKA/IMD-CIS/16/2013
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Facts / Headnote
Show cause notice dated October 12, 2007 and the Complainant's complaint dated January 18, 2011 and February 18, 2011 disposed of; Noticee directed to wind up its collective investment scheme, refund monies with interest/profits, barred from accessing the capital market, and referred for prosecution, police/criminal case, and winding up proceedings.
Provisions invoked
- s. 11A
- s. 11
- s. 24
- s. 19
- s. 11(1)
- s. 12
- s. 11(2)
- s. 67(3)
- s. 67
Regulations
- Reg. 65
- Reg. 3
- Reg. 44
- Reg. 2
- Reg. 2(h)
- Reg. 24
- Reg. 2(2)
- Reg. 2(z)
- Reg. 2(2)(a)
Parties
- Osian's-Connoisseurs of Art Private Limited
Holding
The scheme floated by Osian's-Connoisseurs of Art Private Limited through a private trust constituted a 'collective investment scheme' under section 11AA of the SEBI Act, and the Noticee carried on such scheme without obtaining registration as required under section 12(1B) read with section 11(2)(c) and regulation 3 of the CIS Regulations. The Noticee was directed to wind up the scheme, refund monies to investors with interest/profits, and was restrained from accessing the capital market.
Full text
Page 2 of 21 received from the investors are managed by the Noticee. 3. From the characteristics of the arrangement and scheme sponsored /floated by the Noticee as stated in its above reply, it was prima facie observed that the activities of the Noticee are in the nature of 'collective investment schemes' as defined under section 11AA of the SEBI Act. Since the Noticee was undertaking such activities without obtaining certificate of registration as required under section 12(1B) read with section 11(2) (c) of the SEBI Act and regulation 3 of the CIS Regulations, SEBI issued a show cause notice (SCN) dated October 12, 2007. Oseta, vide its letter dated December 21, 2007, assumed the responsibility to respond to the SCN and filed the reply for itself and on behalf of the Noticee. An opportunity of hearing was granted to the Noticee on September 5, 2008 before the then Whole Time Member when Mr. Darius Khambata, Senior Advocate had appeared and made submissions on behalf of the Noticee. The Noticee had also submitted its written submissions vide its letter dated September 15, 2008.
Page 3 of 21 2008, Hon’ble High Court of Madras observed that SEBI while exercising quasi judicial function cannot entertain the second complaint on same cause of action after rejecting it. The second complaint 'cannot be treated to be review, as there is no power of review with Board under the Act". Therefore, the Hon'ble High Court held that it could not issue direction to deal with the complaint which was not maintainable in law. However, the Hon'ble High Court gave liberty to the Complainant to challenge SEBIs letters dated January 31, 2011 by filing an appeal, if so permissible in law. Pursuant to the same, the Complainant filed an appeal before Hon'ble Securities Appellate Tribunal (SAT).
Page 4 of 21 the Noticee, which is only its sponsor and AMC. The Noticee, is strictly segregated from Osian Art Fund and this arrangement functions more in the nature of a mutual fund. Oseta is fully committed to complying with all applicable laws and regulations. (c) A 'collective investment scheme' under the CIS Regulations has necessarily to be a scheme or arrangement offered by a 'company' but in the present case the scheme has been floated by the Osian, which is structured as a private trust. Prior to the amendment in 2000, any person who floated a scheme which satisfied the requirements mentioned in regulation 2(2)(a) to (d) would have qualified as 'collective investment scheme'. However, post amendment of 2000, it is evident from section 11AA of the SEBI Act and regulation 2(2) of the CIS Regulations that SEBI has consciously introduced the qualification that a 'collective investment scheme' is one which is offered by any 'company' and the same must be given meaning accordingly. Hence, the scheme of trust cannot be construed as a 'collective investment scheme' under the CIS Regulations. (d) S. A. Dave Committee on Collective Investment Schemes, 1998 (Dave Committee Report) indicates that the introduction of CIS Regulations was necessitated to ensure legitimate investment activity in plantation and other agriculture based business. The CIS Regulations have been framed on the basis of the Dave Committee Report. A reading of the CIS Regulations would show that it is inten
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Source: SecMarx — sebi:WTM/RKA/IMD-CIS/16/2013. 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.