Rights of Mutual Fund Investors

Today I will discuss few must known rights as a investors towards mutual fund companies. Hope this information will make you familiar in dealing with mutual fund companies.

1) Purchasing Proceedings-Schemes other than ELSS need to be allotted with 5 working days of closure of NFO. Open-ended schemes, other than ELSS, have to re-open for ongoing sale / re-purchase within 5 business days of allotment.

2) Delay in dispatch of redemption or repurchase proceedings-As per rule, mutual fund companies need to process requests within 10 working days. If delay occurs then they are liable to pay investor interest of 15% PA as delay cost.

3) Unclaimed redemption amount-Any unclaimed redemption amount shall be invested in money market instruments. If investor claims within 3 years then payment should be made according to prevailing NAV. But if investors failed to claim within 3 years then the money will be pool account. Whenever investor claims for this amount NAV of 3rd year end will be payable. Amount earned by mutual fund companies from that pool account will be utilized for investor education.

4) Account Statement dispatch-Mutual Funds shall dispatch Statement of Accounts within 5 business days from the closure of the NFO. But for transactions such as SIP (Systematic Investment Plan), STP (Systematic Transfer Plan) and SWP (Systematic Withdrawal Plan) they need to send you account statement on a quarterly base (March, June, September and December).  However the first investment statement should be issued within 10 working days of initial transactions. Also whenever investor request for account statement, they need to provide it within 5 working days without any charges. If so desired by investor then they need to send soft copies on monthly base.

5) Change of distributor or Adviser-In case investor requested to change distributor or want to go directly then mutual funds need to do so without compelling investor to taken “No Objection Certificate” from existing distributor.

6) Mailing of Annual Reports-Mutual Funds need to send their annual reports to your registered mail id. If mail id not available then they need to send you physical copy to your registered address.

7) Appointment of AMC and Termination of Scheme-The appointment of the AMC for a mutual fund can be terminated by a majority of the trustees or by 75% of the Unit-holders (in practice, Unit-holding) of the Scheme.75% of the Unit-holders (in practice, Unit-holding) can pass aresolution to wind-up a scheme

8) NAV Publishing-NAV need to be publish daily within 9 PM on Mutual Funds site and AMFI site. But for Funds of Funds (FOF) 10 AM of the following day.

9) Nominee-Investor can appoint upto 3 nominees and need to mention % of share in the event of his demise. If % of share not mentioned then equal distribution will be done.

10) Dematerielised form-Investor have option to keep investments either in Dmat form or in physical form. So according to his wish Mutual Funds has to co-ordinate with depository to facilitate this.

11) Scheme Portfolio-The mutual fund has to publish a complete statement of the scheme portfolio and the unaudited financial results, within 1 month from the close of each half year. The advertisement has to appear in one National English daily, and one newspaper published in the language of the region where the head office of the mutual fund is situated. n lieu of the advertisement, the mutual fund may choose to sendthe portfolio statement to all Unit-holders.

Debt-oriented, close-ended / interval, schemes /plans need to disclose their portfolio in their website every month, by the 3rd working day of the succeeding month.Unit-holders have the right to inspect key documents such as theTrust Deed, Investment Management Agreement, Custodial Services Agreement, R&T agent agreement and Memorandum &Articles of Association of the AMCScheme-wise Annual Report, or an abridged summary has to be mailed to all unit-holders within 6 months of the close of the financial year.The Annual Report of the AMC has to be displayed on the web site of the mutual fund. The Scheme-wise Annual Report will mention that Unit-holders can ask for a copy of the AMC’s Annual Report.

12) Dividend and Warrants-Declared dividend and warrants need to be dispatched to investors within 30 days of declaration. In case delay they need to pay investor 15% PA interest as delay cost.

13) Change in Fundamental Attributes of Scheme-A written communication about the proposed change is sent to each Unit-holder, and an advertisement is issued in anEnglish daily Newspaper having nationwide circulation, and in a newspaper published in the language of the regionwhere the head office of the mutual fund is located. Dissenting unit-holders are given the option to exit at the  prevailing Net Asset Value, without any exit load. This exitwindow has to be open for at least 30 days.

These are the few rights investor have towards mutual fund companies. If you found any breach then you can approach Mutual Fund’s Investor Service Center. If your complaints not heed properly then you can approach to SEBI.

(Source-AMFI and SEBI)

6 Comments

  1. Hi Basu,

    I have been following your blogs for a long time. I have invested in the following mutual funds recently.

    1) Reliance Tax Saver (ELSS) Fund – Growth Plan (Rs.5,000 monthly)
    2) SBI Magnum Tax gain scheme – Growth (Rs.5,000 monthly)
    3) SBI Blue Chip Fund – Growth (Rs.5,000 monthly)
    4) Reliance Small Cap Fund (Rs.5,000 monthly)

    Pls let me know if I have chosen the right MF’s or I need to change. I planning to invest for atleast 10 years.

    Thanks,
    Thanda

    Reply
    • Thandaveswara-All are fine but SBI ELSS is underperforming fund. Think over it to switch. What percentage of your investable surplus you are investing? Don’t invest 100% of money into euity.

      Reply
  2. Sure Abhinav 🙂 With the kind of support from you I can do it.

    Reply
  3. Abhinav-Thanks for your encouraging words 🙂 I thought to insert about “consolidated mutual fund folio statement”. But left intentionally because so much feedings at once to few of the new investors may make them confused. Thanks once again for your wonderful knowledge sharing too.

    Reply
    • Agree Basu…looking forward to more of your posts!

      Reply
  4. Thanks Basu for the blog topic and important piece of information. Investors should be made aware of their rights under the mutual fund regulations and the possible ways they can get their grievances redressed. There have also been some recent developments w.r.t. new advertisement guidelines and consolidated mutual fund folio statement, which also go a long way in protecting investor interests.

    All in all, good informative post on investor rights!

    Regards
    Abhinav

    Reply

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