Mauritius is recognized as a leading jurisdiction for setting up and administering funds by both fund managers and investors. It is commonly used for structuring international investments under the Collective Investment Scheme.
What is the Collective Investment Scheme?
Also known as Open-end Funds, but more commonly CIS, the Collective Investment Scheme is a company, a trust or a legal entity that has been prescribed or approved by the Commission under the 2005 Securities Act. Its sole aim is the collective investment of funds in a portfolio of securities, or other financial assets, real property or non-financial assets. Its operation is based on the principle of diversification of risk and it has the obligation, on request of the holder of the securities, to redeem them at their net assets value, less commission or fees. This also involves cases in which the participants do not have day to day control over the management of the property.
Categories of CIS
There are several categories of Open-end Funds / CIS. These are:
- Global Scheme: There is generally no prescribed minimum subscription amount from investors. However, in order to begin its operations, a Global Scheme must receive a minimum amount of subscription of at least 5% of the total amount to be raised from investors, that is, the amount prescribed under its offer document. If during the first 6 months of the offering period, the minimum amount of subscriptions mentioned under the offer document has not been reached, funds which have already been received have to be returned to investors alongside with interest earned. However, the CIS can request for a justified extension of six more months from the FSC. Moreover, the Securities Legislation have prescribed investment restrictions and practices for Global Schemes.
- Expert Funds: If a CIS is authorised as an expert fund, its services shall be made available to expert investors only. These are investors making an initial investment, for their own account, of not less than USD100 000 or is a sophisticated investor, such as a statutory authority established by enactment, banks, a CIS manager, an investment adviser or a dealer. Only those certified by the Board or the CIS manager as expert investors will be accepted in the fund. Its CIS manager does not necessarily have to be a resident of Mauritius. However, he/she must hold a CIS manager licence issued by the FSC Mauritius or a licence issued by a regulatory body in a jurisdiction having comparable regulation as Mauritius for investor protection.
- Professional CIS: either offers its shares to sophisticated investors only or as private placements. It is exempt from complying with various provisions of the Securities Regulations on the condition that the shares acquired by its participants are not resold to the public. Participants are advised of this restriction at the moment of registration. A PCIS benefits from the exemptions on the condition that the regulator is notified 15 days before making an offering and filing a copy of the relevant offer document and on conclusion of the offering, the regulator must be informed of the total amount and value of shares sold.
- Specialised CIS: invests in real estate, derivatives, commodities or any other product authorised by the FSC. An application must be made to the FSC for the approval of this scheme. The FSC will determine which of the regulations would apply and whether specific rules must be issued before making a decision.