Collective Investment Scheme Registration

A collective investment scheme is a type of investment fund that pools money from many investors (retail and institutional) to invest in securities such as stocks, bonds, and other assets. The fund managers invest the pooled money on behalf of the investors in portfolios of different asset classes, such as shares, property, cash or bonds. A key feature of a collective investment scheme is that it allows individual investors to benefit from the economies of scale that would otherwise be available only to large institutional investors.

Difference between a traditional investment fund and a collective investment scheme

A key difference between a traditional investment fund and a collective investment scheme is that the latter is open-ended. That means that the fund manager continuously creates new units for sale to investors and cancels units purchased by investors who wish to redeem their holdings. This flexibility has advantages for small individual investors because it makes it easy for them to buy and sell investments at any time without having to find other buyers or sellers in order to trade their holdings.

The following categories of CIS can be registered with the FSCA:

• Unit trusts;

• Exchange traded funds;

• Real estate investment schemes; and

• Retail participation schemes.

The CIS scheme registration process is regulated by the Collective Investment Schemes Control Act, 2002 (CISCA).

Collective Investment Scheme Participants

• Collective Investment Management Company

• Trustee

• Fund Manager

• Shareholder

Eligibility for Collective investment scheme registration

For a sebi collective investment scheme to be eligible for registration and the issue of a certificate of registration it must comply with the following requirements:

• The promoter or manager must be licensed and registered by the Central Bank in accordance with the provisions of the UCITS Regulations;

• At least two of its directors must be fit and proper persons;

• A net worth of at least five crore rupees is required. However, the applicant's net worth must be at least 3 crore rupees at the time of application, and must reach at least 5 crore rupees within three years following registration clearance.

• Its articles of association or other founding documents must provide that no investor may hold more than 10% of its total voting rights unless it is an authorized person (eg another investment fund);

• It is not able to borrow money except in order to cover temporary liquidity needs for a limited period of time or where such borrowing does not exceed an amount equal to 10% of its net asset value;

• It will only invest in instruments which are admitted to trading on a regulated market or other markets that the Central Bank deems appropriate;

• It will only invest in transferable securities, money market instruments, units in UCITS or other CISs, deposits with credit institutions, cash and near-cash items. Investment companies are

• Individuals who are not directly or indirectly affiliated with the individuals who have control over the concerned Collective Investment Management Company shall make up at least half of the board of such Collective Investment Management Companies.

Rules and Regulations of Collective investment scheme

Collective Investment Schemes (CIS) are investments in which a number of people pool their money together to get a better return than they could achieve if they invested individually. They are regulated by the Central Bank of Nigeria. For these schemes to operate, the rules and regulations that must be met are:

1. The board of trustee must consist of at least 3 members;

2. The networth has to be at least five crore rupees.

3. Any advertisement for the offer for sale of units in a CIS must be accompanied by an announcement stating that an application has been made to the Central bank for approval to issue such units and that investors may lose their money;

4. The prospectus must contain a statement that "the offer is not open to members of the general public as defined by law" and similar statements;

5. There should be no public subscription for the scheme but only private placements;

6. No unit should be issued without prior registration.

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