Topic 2: Rights & Duties of Mutual Fund Investors
Every mutual fund investor enjoys certain rights under SEBI’s laws and rules and fund houses are bound to extend those rights to their investors. Some fund houses, which are investor focused, however, extend services which are more than what their regulatory obligations. Here are some of those rights that mutual fund investors currently enjoy.
Scheme Related Documents
As a potential investor in a mutual fund scheme, you can go through all the details about the scheme that you intend to invest in. You have the right to get a set of documents which include scheme information document (SID) and statement of additional information (SAI). These two together forms the offer document for the scheme you intend to invest in. The fund house should also provide you key information document (KIM), a set of documents containing some important information about the scheme and the fund house. In case there are any changes to the scheme you have invested in, the fund house should inform you about such changes.
Distributor Commission/Fees
You could invest in a mutual fund scheme directly or through an authorized distributor. In case your investment is through a mutual fund distributor, you have the right to know the fees, commissions etc. that the fund house is paying to the distributor who is getting you to invest in the scheme. Rules also allow you to know how much the distributor makes through fees, commissions etc. You also have a right to seek professional help, from a financial planner or advisor, in such situations. After you have invested in a scheme through a distributor, he/she should keep you updated, on a regular basis, about the scheme, market conditions, the investing climate etc. which could make the investing experience better.
Scheme Related Updates
You should get an SMS/email alert from your fund house within five working days after each investment, even SIPs. You can also get a monthly update for all the transactions done during that month from Association of Mutual Funds in India (AMFI), the fund industry trade body. Named consolidated account statement (CAS), this file would contain the details of all transactions, across all schemes from across all the fund houses through which you have invested. For CAS, income tax PAN is the sole identifier. You can register your email ID to get e-CAS. Even if you don't transact every month, every six months you will get a CAS with all the details of your mutual fund holdings. As an investor, you should also receive annual reports from all the fund houses you have your investments with.
Redemption, Dividends Etc.
We invest to reap the benefits when we need the money. So, redemption is as important as investment. When you redeem your investments, you should receive your redemption proceeds within 10 working days. If the proceeds are sent after 10 days, you have a right to receive interest at the rate of 15% per annum for the period of delay after the expiry of the 10th working day. The same rule also applies in case of dividend payments from fund houses, but here the duration is of 30 calendar days. You are entitled to receive interest for any delay in payment of dividend after the expiry of the 30-day period.
Dividend Statement
At times investors may require a summary of dividends received during a financial year. Some fund houses provide mail back services to investors, detailing dividends paid in a portfolio. In case dividend and redemption is not received by an investor, some fund houses provide trackers on their website which help investors to know the status of such payouts.
Missed Call and SMS Services
Some fund houses give the facility to investors where they could give a missed call to a dedicated number and get the full details of their portfolio with that fund house. Some fund houses also allow investors to transact through SMS.
Complaint Redressal System
Every fund house has a complaint redressal mechanism to address investor grievances. If you have any complaints, you can approach the designated officer in the fund house. If that is not redressed to your satisfaction, you can approach AMFI, or even SEBI, the regulator.
Keep KYC Updated, prepare a WILL
As the link between investors and mutual fund houses and companies which sell other financial products, financial planners and advisors play a very important role. They are the first point of contact who make investors aware of their rights and duties. Often along with fund houses, they conduct financial literacy seminars for existing as well as prospective investors to make them aware of various issues related to investing, which also include the rights and the duties of an investor so that the experience of investing remains smooth & hassle free.
"One of the first things that we insist for all our clients is that they should go for the 'Anyone or survivor' option for accounts and also opt for nomination," said Nirav Panchmatia, founder-CEO, AUM Financial Advisors. Such a process ensures that the transition of wealth and investments are smooth in case the main person who is investing incapable to carry of the transaction for any reason.
Updated information in every investor’s Know Your Customer (KYC) log is also very important. For the last couple of years, SEBI has made KYC compliance much easier and once a KYC data is uploaded with one KYC registration agency, the same is valid for all transactions across all investments regulated by SEBI. Any change in KYC data is also replicated with other KRAs within a few days.
Financial planners and advisors also help investors keep away from schemes which are not registered with SEBI. Often investors fall prey to ponzy schemes. So, make them aware of such schemes and tell them that they should not invest through cash, the investments should be in cheque and should be in the name of an entity registered with SEBI.
Financial planners and advisors also tell their clients that they have the right to ask about the fees and commissions that the planners and advisors receive by selling a product to them. This is a SEBI mandate and once this is settled, usually the process of advisor-investor relationship is smooth.
Source: timesofindia.indiatimes.com
Scheme Related Documents
As a potential investor in a mutual fund scheme, you can go through all the details about the scheme that you intend to invest in. You have the right to get a set of documents which include scheme information document (SID) and statement of additional information (SAI). These two together forms the offer document for the scheme you intend to invest in. The fund house should also provide you key information document (KIM), a set of documents containing some important information about the scheme and the fund house. In case there are any changes to the scheme you have invested in, the fund house should inform you about such changes.
Distributor Commission/Fees
You could invest in a mutual fund scheme directly or through an authorized distributor. In case your investment is through a mutual fund distributor, you have the right to know the fees, commissions etc. that the fund house is paying to the distributor who is getting you to invest in the scheme. Rules also allow you to know how much the distributor makes through fees, commissions etc. You also have a right to seek professional help, from a financial planner or advisor, in such situations. After you have invested in a scheme through a distributor, he/she should keep you updated, on a regular basis, about the scheme, market conditions, the investing climate etc. which could make the investing experience better.
Scheme Related Updates
You should get an SMS/email alert from your fund house within five working days after each investment, even SIPs. You can also get a monthly update for all the transactions done during that month from Association of Mutual Funds in India (AMFI), the fund industry trade body. Named consolidated account statement (CAS), this file would contain the details of all transactions, across all schemes from across all the fund houses through which you have invested. For CAS, income tax PAN is the sole identifier. You can register your email ID to get e-CAS. Even if you don't transact every month, every six months you will get a CAS with all the details of your mutual fund holdings. As an investor, you should also receive annual reports from all the fund houses you have your investments with.
Redemption, Dividends Etc.
We invest to reap the benefits when we need the money. So, redemption is as important as investment. When you redeem your investments, you should receive your redemption proceeds within 10 working days. If the proceeds are sent after 10 days, you have a right to receive interest at the rate of 15% per annum for the period of delay after the expiry of the 10th working day. The same rule also applies in case of dividend payments from fund houses, but here the duration is of 30 calendar days. You are entitled to receive interest for any delay in payment of dividend after the expiry of the 30-day period.
Dividend Statement
At times investors may require a summary of dividends received during a financial year. Some fund houses provide mail back services to investors, detailing dividends paid in a portfolio. In case dividend and redemption is not received by an investor, some fund houses provide trackers on their website which help investors to know the status of such payouts.
Missed Call and SMS Services
Some fund houses give the facility to investors where they could give a missed call to a dedicated number and get the full details of their portfolio with that fund house. Some fund houses also allow investors to transact through SMS.
Complaint Redressal System
Every fund house has a complaint redressal mechanism to address investor grievances. If you have any complaints, you can approach the designated officer in the fund house. If that is not redressed to your satisfaction, you can approach AMFI, or even SEBI, the regulator.
Keep KYC Updated, prepare a WILL
As the link between investors and mutual fund houses and companies which sell other financial products, financial planners and advisors play a very important role. They are the first point of contact who make investors aware of their rights and duties. Often along with fund houses, they conduct financial literacy seminars for existing as well as prospective investors to make them aware of various issues related to investing, which also include the rights and the duties of an investor so that the experience of investing remains smooth & hassle free.
"One of the first things that we insist for all our clients is that they should go for the 'Anyone or survivor' option for accounts and also opt for nomination," said Nirav Panchmatia, founder-CEO, AUM Financial Advisors. Such a process ensures that the transition of wealth and investments are smooth in case the main person who is investing incapable to carry of the transaction for any reason.
Updated information in every investor’s Know Your Customer (KYC) log is also very important. For the last couple of years, SEBI has made KYC compliance much easier and once a KYC data is uploaded with one KYC registration agency, the same is valid for all transactions across all investments regulated by SEBI. Any change in KYC data is also replicated with other KRAs within a few days.
Financial planners and advisors also help investors keep away from schemes which are not registered with SEBI. Often investors fall prey to ponzy schemes. So, make them aware of such schemes and tell them that they should not invest through cash, the investments should be in cheque and should be in the name of an entity registered with SEBI.
Financial planners and advisors also tell their clients that they have the right to ask about the fees and commissions that the planners and advisors receive by selling a product to them. This is a SEBI mandate and once this is settled, usually the process of advisor-investor relationship is smooth.
Source: timesofindia.indiatimes.com