MMTC plan for retail sale of gold not a collective scheme: Sebi

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State-owned MMTC's proposal to sell gold to retail customers through a joint venture does not fall under the collective investment scheme category as the JV is neither offering any kind of returns nor is there any pooling of funds, Sebi has said.

MMTC, along with Swiss firm PAMP plans to sell gold to retail customers through the JV -- MMTC-PAMP India Pvt Ltd.

Sebi's view on the proposal has come in response to a clarification sought by MMTC.

"A customer entering the flexible gold purchase scheme of MMTC-PAMP retains control over his investment at all point of times," Sebi said in a communication to MMTC.

"In other words, the customer is not under any obligation to make continuous or recurring payments. On the other hand, he can take delivery of gold and redeem the fractional entitlement (if any)," it added.

Securities and Exchange Board of India has said that the proposed business activity primarily involves purchase or accumulation of gold by customers who aspire to buy the metal but have limited financial resources for an outright purchase.

The business plan can't be treated as CIS since the JV is not making any projection of offering any kind of returns and there is no pooling of funds of the buyers. Besides, customers are entering into independent obligations of purchase/ redemption of fractional entitlement of gold, Sebi noted.

"As per the structure of the proposed business activity, only the quantity of gold against which payments have been made will be delivered to the customer," Sebi said.

Sebi's informal guidance, dated October 17, 2013, was released only today, due to 90-day confidentiality clause as per the norms.

Generally, a scheme is treated as CIS if the payments made by the investors are collected and utilised for the purposes of the scheme and the investors are expecting a profit on their investment.

As per Sebi norms, any pooling of funds under any scheme that involves a corpus amount of Rs 100 crore or more would be deemed as a CIS. Investors in such schemes do not have day-to-day control over the scheme, among others.

With regard to timing, quantity and frequency of purchase for the proposed business plan, Sebi said such things are at the discretion of the customer.

Further, Sebi observed that in order to become a member of the proposed scheme, KYC (Know Your Client) norms need to be complied with and all the payments against the gold would be through net banking, credit card and debit cards only.

MMTC-PAMP is mainly into refining of precious metals and selling them to wholesalers.

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