Rights And Duties Of Mutual Fund Investors

From buying an MF scheme till seeking redemption, rules try to ensure that investors' interests are protected. But investors too need to keep their house in order  As an investor in a mutual fund scheme, you enjoy several rights, which are bound by legal provisions. At the same time, to have a stress-free investment experience, like enjoying the rights, you also have certain duties to fulfil. Here's is a primer on your rights and duties as an investor:  THE RIGHTS  Offer document: When you decide to invest in a mutual fund scheme, you have the right to go through the details of the plan in the scheme information document (SID) and the statement of additional information (SAI). These two form the offer document.      You are also entitled to receive the key information document (KIM), which will give you some important information about the scheme as well as the fund house.In case of any changes, the fund house has to inform you about it.  What the distributor gets and gives? Another very important piece of information that you should get is the amount of money, or the commission, that your mutual fund distributor is getting by selling the scheme to you. Your distributor should also tell you the commissions or remunerations that he or she gets by selling other schemes competing with the one you are buying. The comparison will give you a good idea if the distributor is pushing a product that gives him higher commission or not.      If the scheme you are buying gives your distributor the highest commission, it should ring a bell. Besides, even if the distributor is selling you the product best suited to your financial and risk profile, you as an investor should study the scheme as well as competing products before deciding on the best one. It's advisable that you take the help of a professional financial planner or an advisor.      Besides, your distributor should also give you advice about your scheme and the market in general till you remain invested in the scheme.  Annual reports, statements, updates: You are entitled to receive the annual report from the fund house every year, either through post or as an email.You should also get an alert through email or SMS within five working days after either you have invested in a fund or made some additional purchase.      About a year ago, some of the registers for the fund industry got together and started a practice that now entitles every investor to get a monthly update of the transactions done during the month. This update includes all the transactions across all schemes and fund houses, tracked and disseminated with the PAN as the sole identifier.In case there was no transaction,every six months you will get a consolidated statement of holding of all non-transacted folios.      Every six months, fund houses are also required to  publish their statement  of accounts, along  with portfolios, in at  least two newspapers. As an investor,  you should not track  your portfolio on a daily basis, but through these newspaper publications.  Redemption and dividend payouts: As an investor you have the right to receive redemption proceeds within 10 working days. Here, the critical thing to note is that your fund house should send the redemption proceeds within 10 working days. In case a fund house sends the proceeds after 10 days, you have the right to receive interest at the rate of 15% per annum for the period of delay after the expiry of the 10th day. Thus also applies to dividends, the only difference being that you become eligible for interest after 30 days.  Change in a scheme: In case your fund house makes some fundamental changes to the scheme in which you have invested,you have the right to exit without paying exit load. Fundamental attributes include the change in the fund's risk profile, the types of instruments it can invest in — like from being an equity fund with 65% exposure to equities or related investments to below that, qualifying it as a debt fund and thus losing the tax advantage.  Complaint redressal: Every fund house has appointed an officer to attend to investor grievances. If the complaint is not resolved as to your satisfaction, you can escalate it to the compliance officer, or even the CEO. If it is still not resolved, you can move AMFI, the fund industry trade body, or even Sebi, the industry regulator.  THE DUTIES  Update personal info: As an investor, you should update all the relevant personal information with the fund house in which you have your investments. These include your contact address, mobile number and email ID (if any), your income tax PAN card details, your main bank account number through which you want your fund-related transactions to be done, IFSC code, and know your client (KYC) compliance. In case of any change in any of these details, you should inform your fund house. According to fund industry officials, updated personal information helps fund houses to send transaction alerts through SMS, send fund statements and transaction information through emails, and to credit money from redemptions and dividends to your bank account directly and quickly. This also helps the fund house to send all correspondence to you in time and with regularity.      Of these,the most important ones are your address for correspondence and your bank account details, fund industry officials say.Updated information not only helps the fund house to service you better,it also helps in lowering risks associated with financial frauds, they say.  Proper nominations: As an investor, you should make nominations to each and every scheme that you have your investments in. This will help your family in case you meet with any unfortunate event.  Switching schemes: Whenever you are switching from one scheme to another, you should take care to go through the pros and cons of such a switch and then decide whether such a switch is good for you for the long haul. If you are undecided, take help from a financial advisor or a planner.  Be careful with your documents: Before you sign any fund-related document, read and understand first and then sign. In case you don't understand any part or point in it, seek professional help. And more importantly, never presign any transaction-related document or form which concerns your investments.      When you receive any statement of your portfolio, go through it carefully and ensure the accuracy and correctness of all the information in it. In case of any discrepancy, take it up with the fund house immediately. When you receive a dividend warrant or a redemption cheque, make sure you encash it immediately. Remember that since April 1 of this year, all the cheques are issued with three months validity, down from six months earlier.  Direct bank credit: Almost all the fund houses have electronic credit and debit facilities with most of the banks,which is fast, secure, safe and hassle-free. If you have the facility for electronic transfer of funds into your bank account,for dividend receipts and redemptions, ensure that your bank account number, MICR and IFS codes are updated. Remember, online transactions also make you an environmentally responsible citizen. So mutual fund houses prefer their investors go for electronic banking facility.  KYC compliance: As a mutual fund investor you should be know your client (KYC) compliant, which is a government mandated requirement,  mainly aimed at prohibiting money laundering. So it's your duty to complete the KYC requirement for Sebi regulated entities. Lately, this has become hassle-free. Once you complete your KYC with any of the designated agencies, called KYC Registration Agency (KRA), it is valid across all financial services regulated by Sebi, that is mutual funds, stock and derivatives trading and currency trading. And if you update your KYC, within a few days that will automatically get updated in all your investments which are regulated by Sebi.Watch NAVs regularly:Finally, since it's your money,be careful to keep a tab on your investments and NAVs on a regular basis. But never make it a habit to look at it on a daily basis.  KEEP IN MIND  Disabled DND for SMSes  For getting regular updates from your fund house on your mobile through SMS, you need to have your 'Do Not Disturb' (DND) disabled for BFSI (banking, financial services and insurance) segment. If you have your DND enabled but want to receive updates from your fund house, you can check with your mobile service provider how to allow such SMSes.  MICR and IFSC  In any cheque of a bank, the IFS code is mentioned below the address of your branch, and along with RTGS/NEFT. Each cheque leaf will clearly mention 'IFSC:… (an eleven character alpha-numeric code)'. For MICR, you should look for the nine digits mentioned after the cheque number at bottom of a cheque leaf.