Aware of your rights as an MF investor: Study all offer documents carefully

To have a smooth financial journey as an investor, you have to fulfil certain duties and, under the laws that regulate the mutual fund industry, you also enjoy some rights.

An ideal investor is one who is aware of the rights, and disciplined and serious about his/her duties too.

Some of the important rights that you enjoy as an MF investor include the freedom to go through the offer document of the scheme that you intend to invest in, email/SMS alerts relating to your investments, receiving annual reports, periodic updates and other important communications from the fund house including any proposed change in a scheme's attributes.

You also enjoy the right to know how much commission the person who is advising you to invest is getting from the fund house. Also, you can get your complaints, if any, redressed through proper channels and to your complete satisfaction.
Your rights as a mutual fund investor -

Offer document

An offer to invest in an MF scheme contains the scheme information document (SID) and a statement of additional information (SAI). In addition, you can also go through the key information memorandum (KIM), which gives important information about the scheme you intend to invest in as well as the fund house.

Colour coding

This is a new tool aimed at helping investors choose between MF schemes which are least risky (Blue dot), moderately risky (yellow dot) and highly risky (brown dot). Here, each fund house labels every scheme with the appropriate code to make it easier for you to select the one best suited to your risk profile.
Email/SMS alerts

Within five working days of your investing in a scheme - either for the first time or as a continuing investor - you should receive an email alert or an SMS about your investments.

Fund statements, periodic updates and annual reports

As an investor in a scheme, you should receive periodic updates from the fund house about the scheme as well as the fund house, its annual report and updates as and when issued.

Consolidated statements

Relatively a new initiative, all MF investors now get a consolidated monthly statement of all their fund-related transactions in each scheme where he/she has investments, across all types of schemes (equity, debt, liquid, gold ETF) and across all fund houses. However, if there is no transaction during a particular month(s), you will receive a half-yearly statement.

Redemption and dividend payouts

Within 10 working days after you redeem your investments; you should get your redemption proceeds. If this 10-day period is overshot, you can claim interest at 15% per annum for the period of delay after the 10th day. In case of dividend payout, the outer time limit is 30 calendar days.

Change in a scheme's attributes

If the fund house changes any key attribute (like fund's risk profile, type of instruments it can invest in, etc) of the scheme you have invested in, you can redeem your investments in that scheme without paying any exit load.

How much does the distributor make?

Ask your distributor how much he/she makes as commission by selling the scheme in which you are investing, and comparative commission receipts for other schemes that he/she sells you. In case you see that the distributor is getting the maximum or a higher commission by selling a particular scheme to you, ask the reason for investing in such a scheme.
Also, Sebi has come out with a new set of regulations for investment advisers which differentiates between those who are on the side of the investors and those on the side of MFs. Those who are advising investors should be registered with Sebi and have the freedom to charge a fee for their advice but should not receive any commission from fund houses.

Duties of a fund investor

As an investor, your first duty is to be KYC-complaint. Some of the other important duties include updating your fund houses with your relevant personal information (address for correspondence and bank account details, among other things), keeping proper nominations for all investments, keeping tab of your investments on a regular basis (but not daily), having a direct credit facility with your bank in place, etc.
All fund houses offer electronic credit and debit facilities with most banks that ensure fast, secure , safe and hassle-free banking transactions between you and your fund house for regular investments , dividend payouts and redemptions.
Aware of your rights as an MF investor; Study all offer documents carefully
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(Posted date - 09 Oct 2013)

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