Mutual Funds – Investor Rights & Obligations 

Market regulators and other legal provisions guarantee certain rights to mutual fund investors. This short list summarizes these rights:

Redemption, Dividend Payout, & Bonus

Within ten working days, all investors have the right to receive redemption instructions. Interest is payable to the investor at a rate of 15% per annum from the date of expiration until the next business day. In the same way as dividends, receiving a dividend also requires waiting – but here only 30 days instead of 10 working days are required.

Scheme Details Of The Documents

Investors have the right to review the document details of a mutual fund scheme before investing. Together, they form the offer document for the scheme, known as SID (Scheme Information Documents). KIMs (Key Information Documents) are also given to investors, which provide important data about the scheme and the fund house. When anything changes in the documentation, the fund house will let the investor know.

Additionally Refer to Time Value of Money

Annual Reports, Statements & Periodic Updates

Investment portfolios of fund investors reported to investors annually. Investors may receive this information via email or by mail. Once we invest in the fund, the investor should receive either an email or SMS alert – or both – within five business days. SIPs or periodic lumpsum investments will be no different. In the mutual fund business, some registrars offer combined monthly updates on transaction activity for the previous month. Newspapers and advertisements also used to communicate statements of accounts and portfolio information about fund houses to their investors.

Change in Scheme Attributes for Mutual Fund Investors

The investor of an investment scheme in the fund house in which he invests can exit that scheme without having to pay an exit load if the fund house makes any fundamental changes to it. Those changes include:

  • Changing the equity scheme to date
  • Reducing exposure to 65%
  • Investment instruments offered by the scheme
  • Changing a fund’s risk profile
  • Distributor Commission

It is the right of every investor to know how much money, or how much commission, his mutual fund distributor receives for selling the scheme. His distributor should also provide the investor with this information. The investor will be able to figure out if the distributor is pushing the product for a higher commission or not by knowing such details. Furthermore, there is every possibility that the distributor is selling the best suited product for investors; but the investor should nonetheless put in the effort to study them. It’s highly recommended that the distributor informs the investor about the scheme on a regular basis.

System for Resolving Complaints

  • Investor grievances handled by an officer appointed by every fund house
  • In case of non resolution, the person can escalate it to the compliance officer or chief executive officer or managing director or in worst-case scenarios, to SEBI

You have certain rights as an investor in mutual funds, beyond making regular investments – find out what they are!

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