How does Timeshare Investments fall under the 

SEBI"s CIS Regulation, 1999 ?

If we examine the provisions, it falls very much under the definition of  CIS Regulations, 1999. Let us see what the Regulation says and how it applies to Timeshare investments:

Under the Regulations, a Collective Investment Scheme is any scheme or arrangement, which satisfies the conditions, referred to in sub-section (2) of section 11AA of the SEBI Act.

Any scheme or arrangement made or offered by any company under which,—

(i) the contributions, or payments made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement;

(ii) the contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement;

(iii) the property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv) the investors do not have day-to-day control over the management and operation of the scheme or arrangement.

In case of timeshare, the payments made by the investors are pooled and utilised for the purpose of the scheme, with a view to receive a part of the property and the income & benefits arising out of it. 

The property / investment is managed on behalf of the investors by the timeshare company or its associate company formed for this specific purpose and the investors do not have day-today control over the management and operation of the scheme.

Therefore, timeshare is a Collective Investment Scheme under the SEBI Regulations and these companies fall under these Regulations.

 Moreover, Investment in Timeshare is not specifically excluded under the scheme; As per the CIS Regulation, The following do not constitute a CIS:

1. any scheme or arrangement made or offered by a co-operative society or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State;
2. any scheme or arrangement under which deposits are accepted by non-banking financial companies
3. any scheme or arrangement being a contract of insurance to which the Insurance Act, applies;
4. any scheme or arrangement providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees Provident Fund and Miscellaneous Provisions Act, 1952
5. any scheme or arrangement under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956);
6. any scheme or arrangement under which deposits are accepted by a company declared as a Nidhi or a mutual benefit society under section 620A of the Companies Act, 1956 (1 of 1956);
7. any scheme or arrangement falling within the meaning of Chit business as defined in clause (d) of section 2of the Chit Fund Act, 1982 (40 of 1982);
8. any scheme or arrangement under which contributions made are in the nature of subscription to a mutual fund;

Obviously timeshare investment is not a FD with a NBFC, Pension Scheme, Insurance Scheme, Nidhi or Mutual Fund, as mentioned above. It is not forming part of the list of specific exclusions. 

Therefore, it is clearly evident from the above definitions explanations that, these investments very much come under the SEBI’s CIS Regulations, 1999.

Since it ( is not specifically excluded from the Regulation and ) fits into every explanation / defenition of a CIS, it is high time these investments are regulated in order to save lakhs of investors !