No cash transactions in CIS : SEBI move to check laundering

The market regulator, Securities and Exchange Board of India (SEBI) made it compulsory for all investments into Collective Investment Scheme (CIS) funds to be made through banking channels, and not in cash, to prevent any money laundering activities through such schemes.

As per the regulations of SEBI  
  • Money payable towards subscription of units of CIS shall be paid through cheque or demand draft or through any other banking channel, but not by cash.
  • For launching any such scheme, a person needs to make an application for registration as a Collective Investment Management Company (CIMC) provided that any scheme which is otherwise regulated or prohibited under any other law will not be deemed to be a CIS.
  • The CIMC will enter into an agreement with a depository for dematerialisation of the units of the scheme proposed to be issued. It will follow with Know Your Client guidelines. 

The new norms are known as the Securities and Exchange Board of India (Collective Investment Schemes) (Amendment) Regulations, 2014. These will help to improve transparency in fund-garnering activities through CIS activities and will make it easier to identify the source of funds and real investors involved in such schemes.

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