Module 1 : Investor Rights and Obligations
Rights of investors
Mutual funds in India are regulated by The Securities and Exchange Board of India (SEBI). One of the primary responsibilities of SEBI is protection of investor interests. Every mutual fund investor enjoys rights under SEBI’s regulations. Asset Management Companies are obligated to ensure that every investor is able to exercise his / her rights. Below are some of the key rights of investors in India.
Rights of investors
Mutual funds in India are regulated by The Securities and Exchange Board of India (SEBI). One of the primary responsibilities of SEBI is protection of investor interests. Every mutual fund investor enjoys rights under SEBI’s regulations. Asset Management Companies are obligated to ensure that every investor is able to exercise his / her rights. Below are some of the key rights of investors in India.
Go through Scheme Related Documents before investing
An investor has the right to go through all the scheme related documents before investing. These documents include the Scheme Information Document, Statement of Additional Information and Key Information Memorandum. We have discussed some major items in the contents of these documents in our chapter ‘SID, SAI, KIM before investing’. The AMC must provide these documents to investors if asked for. If there are any changes in a scheme, the AMC must also inform unit-holders / investors of the scheme about the changes.
Know commissions paid to distributors
If you are investing through a mutual fund distributor or financial advisor, then you have the right to know the commissions paid to the distributor on your mutual fund investments. From 2016, SEBI has mandated that AMCs disclose actual commissions paid to distributors for each scheme in half yearly (September / March) Consolidated Account Statement (CAS). This will give a fair idea if your advisor has your best interests in mind when recommending mutual fund schemes for investments.
Interest on delayed dividends
If your mutual fund scheme declares dividends then the dividend amount should get credited to your bank account within 30 days from the date of dividend declaration. If the AMC is not able to credit the dividend amount to your bank account within 30 days, then it is liable to pay you interest at the rate of 15% per annum for the period of delay.
Interest on delayed redemption
If you redeem units of your mutual fund scheme, then the redemption proceeds should get credited to your bank account within 10 days from the date when redemption instruction was processed. If the AMC is not able to credit the redemption proceeds to your bank account within 10 days, then it is liable to pay you interest at the rate of 15% per annum for the period of delay.
Consolidated Account Statement
A CAS details all the transactions and investor’s holding at the end of the month including transaction charges paid to the distributor, across all schemes of all mutual funds, by an investor. A CAS for each calendar month is issued to the investors in whose folios transactions have taken place during that month. A CAS every half yearly (September/ March) is issued, detailing holding at the end of the six month, across all schemes of all mutual funds, to all such investors in whose folios no transaction has taken place during that period.
Complaint redressal system
If you have a complaint on any investment related issue, you can contact the grievance cell of the concerned Asset Management Company. Every AMC must have grievance cell or grievance redressal officer. The contact details of the grievance cell should be mentioned on the AMC’s website. Investors can also register their complaints with Trustees of the mutual fund. The names of Trustees of a fund are mentioned in the Statement of Additional Information. If your complaint is not satisfactorily resolved by AMC or trustees of the fund, then you can send your complaint to SEBI as per rights of investors under SEBI.
Securities and Exchange Board of India
Office of Investor Assistance and Education (OIAE)
Plot No.C4-A, “G” Block, 1st Floor, Bandra-Kurla Complex,
Bandra (E), Mumbai – 400 051.
Phone: 26449199-88-77
You can also lodge your complaint online on https://scores.gov.in/scores
Go through Scheme Related Documents before investing
An investor has the right to go through all the scheme related documents before investing. These documents include the Scheme Information Document, Statement of Additional Information and Key Information Memorandum. We have discussed some major items in the contents of these documents in our chapter ‘SID, SAI, KIM before investing’. The AMC must provide these documents to investors if asked for. If there are any changes in a scheme, the AMC must also inform unit-holders / investors of the scheme about the changes.
Know commissions paid to distributors
If you are investing through a mutual fund distributor or financial advisor, then you have the right to know the commissions paid to the distributor on your mutual fund investments. From 2016, SEBI has mandated that AMCs disclose actual commissions paid to distributors for each scheme in half yearly (September / March) Consolidated Account Statement (CAS). This will give a fair idea if your advisor has your best interests in mind when recommending mutual fund schemes for investments.
Interest on delayed dividends
If your mutual fund scheme declares dividends then the dividend amount should get credited to your bank account within 30 days from the date of dividend declaration. If the AMC is not able to credit the dividend amount to your bank account within 30 days, then it is liable to pay you interest at the rate of 15% per annum for the period of delay.
Interest on delayed redemption
If you redeem units of your mutual fund scheme, then the redemption proceeds should get credited to your bank account within 10 days from the date when redemption instruction was processed. If the AMC is not able to credit the redemption proceeds to your bank account within 10 days, then it is liable to pay you interest at the rate of 15% per annum for the period of delay.
Consolidated Account Statement
A CAS details all the transactions and investor’s holding at the end of the month including transaction charges paid to the distributor, across all schemes of all mutual funds, by an investor. A CAS for each calendar month is issued to the investors in whose folios transactions have taken place during that month. A CAS every half yearly (September/ March) is issued, detailing holding at the end of the six month, across all schemes of all mutual funds, to all such investors in whose folios no transaction has taken place during that period.
Complaint redressal system
If you have a complaint on any investment related issue, you can contact the grievance cell of the concerned Asset Management Company. Every AMC must have grievance cell or grievance redressal officer. The contact details of the grievance cell should be mentioned on the AMC’s website. Investors can also register their complaints with Trustees of the mutual fund. The names of Trustees of a fund are mentioned in the Statement of Additional Information. If your complaint is not satisfactorily resolved by AMC or trustees of the fund, then you can send your complaint to SEBI as per rights of investors under SEBI.
Securities and Exchange Board of India
Office of Investor Assistance and Education (OIAE)
Plot No.C4-A, “G” Block, 1st Floor, Bandra-Kurla Complex,
Bandra (E), Mumbai – 400 051.
Phone: 26449199-88-77
You can also lodge your complaint online on https://scores.gov.in/scores