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 are allowed to 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 also 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 the 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 if he/she sells a competing scheme to you. This information can give you some idea if the distributor is pushing you a scheme that will give him/her a higher remuneration than a competing product. If you find that the your distributor is getting the highest commission by selling the scheme in which you intend to invest, in that case you should probe a little more about the suitability of the scheme that you intend to invest in.
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 particular 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 eCAS. 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.
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.
Keep KYC updated, prepare a will
“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 investors 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. “We ensure that all the KYC-related information like name is correctly entered, contact address, mobile number and other information are up to date,” said Panchmatia.
Another very important aspect to good investing is making a Will, said Panchmatia. “Often it is seen that the investments that the main member in the family had made is completely unknown to the other members in the same family. Having a Will helps solve that kind of problems,”Panchmatia said.