Enjoy the rights but don’t disregard your duties as a mutual fund investor

Last Updated : July 28, 2016, 6:30 a.m.

Just like you enjoy privileges and have some duties being a citizen of the country, similarly a mutual fund investor also holds rights and has certain duties to take care of. The laws and norms of the Securities and Exchange Board of India (SEBI), the market regulator, are likely to enhance the rights and duties of mutual fund investor. The proportion of rights and duties, however, can vary from one fund house to another. We, in this article, will discuss on the rights and duties that you have as a mutual fund investor.

Rights

Access to documents of mutual fund scheme

You will be given the rights to view the details of the mutual fund scheme that you are planning to invest in. You can receive a set of documents that will include Statement of Additional Information (SAI) and Scheme Information Document (SID), which are the part of the offer document of the scheme you plan to invest in. The asset management company (AMC), also called as fund house, must provide you Key Information Document (KIM), which will have different documents offering key information pertaining to the scheme and itself. The fund house has the responsibility to inform you of any changes made to the scheme.

Right to know fees/commission of distributor

You have the option of investing in a mutual fund scheme by either directly or through an authorized distributor. If latter is the case, then you hold the right to ask about the fees, commissions and other payments that the fund house pays to the distributor on taking you on the board. The rules also stipulate that the investors should have the access to know the money that distributors make through commissions, fees and other payments on selling the competing scheme to them. As an investor, you can get an idea about the strategy of the distributor to get more remuneration than a competing product by pushing you to select the scheme. If the distributor is receiving more remuneration by selling the scheme in which you want to invest, then you must introspect with regards to the scheme’s suitability in terms of your risk profile and investment objective. If in the probe it is found that the scheme does not match these parameters, then you must avoid the scheme. In addition, you also gain the right to get the professional help from  advisors or financial planners to tackle such situations. If you have made an investment through the distributor, then the concerned individual should update you about the scheme, market conditions regularly so that it will help you invest in the scheme for long.

Updates on scheme

After each investment in a mutual fund scheme be it SIP or others, you are supposed to receive SMS or email alert from your fund house within 5 working days. Moreover, you can also be updated on all the executed transactions in a certain month from the Association of Mutual Funds in India (AMFI), the trade body of the mutual fund industry, on a monthly basis. The update will come in the form a file namely, Consolidated Account Statement (CAS), which would include details of all the transactions of every scheme of all the fund houses through which you have made investments in mutual fund. Even during the time when you don’t make the transaction every month, you will get a CAS on a half-yearly basis. You can also get annual reports from the fund houses where you have made investments.

Right to get proceeds of redemption

Just like investment is important, you have the right to redeem it when you deem fit. You have the right to get the proceeds on the redemption of your mutual fund investment within 10 working days. Later than 10 days, you are entitled to get the interest at 15% per annum after the 10th working day to the number of days for which the proceeds are delayed. Similarly, you can get the dividend from fund houses within 30 days. Any delay will earn you the right to get interest on dividend.

Access of dividend statement

You, as an investor, might be keen to get the dividend summary of a particular year. Your fund house could either e-mail you the details of dividend payment or you can go to the trackers provided by the AMC in their website to access the status of dividend payouts.

Right to complain of any wrong doing

You can take advantage of the complaint redressal mechanism, which is instituted by the fund houses to address the grievances of the investors. You can reach to the designated officer in your fund house on any complaints. If the concerned officer fails to resolve your problem or does but not in a satisfactory manner, then you hold the right to approach SEBI and AMFI.

So, these were the rights that you hold as a mutual fund investor. Now get down to the duties that you have to do for a good run in mutual fund investment.

Duties

Proper updation of details

As part of Know Your Client (KYC) Compliance, you are required to help the fund house in correctly updating all the necessary personal details, which will include your residence address, mobile number and e-mail ID, if any, PAN card details. You are also required to submit bank account details such as account no, IFSC code, MICR, which are necessary for auto debit and credit done by the fund house on the nature of the transactions. Any changes in these will require you to inform your fund house.

Make nominations properly

It is indeed an important task of a mutual fund investor to make nominations of every scheme in a proper manner. In case you meet with any unfortunate incident leading to your death, you will be helping your family get the proceeds of mutual fund investment by doing nomination.

Be careful in switching schemes

It requires a great deal of care on an individual’s part while switching from one scheme to another. You must look at the both the benefits and pitfalls of switching the schemes and then come up with the decision to either hold or discontinue the investment.

Do due diligence in signing documents

Do make sure you read and understand the details of the scheme before signing any document related to the funds in which you want to invest. Feel free to take professional help from advisors or financial planners on failing to understand any point mentioned in the document. Never ever pre-sign any transaction related document and form as it could raise concern on your investment. Carefully read the statement of your portfolio when you receive it and make sure you check the accuracy of the information presented in the same. You should take up discrepancy, if any, to the fund house immediately. Ensure you encash the dividend warrant or redemption cheque immediately.