SEBI Regulations
you need to know as Mutual Fund investor..!
Principal PNB Asset Management Company
If you have seen a television advertisement (advt.) of any mutual fund (MF), you can not miss the clear disclaimer that accompanies the advt. in the end,
“Mutual fund investments are subject to market risks, read all scheme-related documents carefully.
” Or in a print ad, the disclaimers which occupy a significant portion of the advertisement. These disclaimers are mandatory as specified by the Securities and Exchange Board of India (SEBI).
While mutual fund investments do carry market risk as their net asset values (NAVs) move daily based on the market movements of underlying assets held (be it debt or / equity or other assets like gold, etc.), it is also true that mutual fund products are strictly regulated for this very reason.
There are some important regulations that an investor should be aware of. Of these 5 important ones are listed here:
1. KYC compliance..!
While this may seem obvious being the most
basic of all regulatory requirements, even now many investors who invested in
the past and new first time investors are not aware of this requirement. This
is also because KYC requirements have been undergoing changes over the past
many years.
If
you are investing through an advisor, s/he would know the process else one can
check one’s status online easily with any of the KRAs (KYC Registration Agency
like CAMS, CVL, Karvy etc) and if not compliant, submit documents for the same.
It is a one time process only. Once KYC registration is done, transactions in
mutual funds can be done smoothly.
2. Transaction confirmation..!
Any transaction that you do as a mutual fund investor be it purchase, sale, switch, SIP, STP etc is confirmed by the mutual fund. It is a regulatory requirement for mutual funds to issue a transaction confirmation to the investor within 5 business days.
If you have not received such a confirmation you should check with the fund house or your advisor on the status of your transaction immediately.
I know a friend of mine who started a SIP with a mutual fund but came to know after six months that the SIP never got registered.
To avoid such issues, always ensure you get the transaction confirmation from the mutual fund (usually sent through email or SMS alert).
2. Redemptions..!
If you have given a redemption request for any MF investment that you hold, there is a regulatory requirement that the fund house should dispatch the redemptions warrants within 10 business days.
If not then there is a penal interest levied at 15% p.a. for the delay.
Nowadays of course one notices that most mutual funds process redemptions fairly quickly within two-five business days depending on the type of mutual fund scheme you have invested in.
3. Customer complaint resolution..!
Most mutual funds have mechanisms internally to track customer complaints and resolve them in a speedy manner. If you have a grievance do write in to the mutual fund concerned.
Many investors may not know that SEBI also a dedicated website called SCORES (www.scores.gov.in) where an investor can register complaint against SEBI regulated entities including mutual funds.
4. Changes in scheme features..!
It is important for an investor to remain updated about the changes in the features of the scheme s/he has invested in. Mutual funds can effect two types of changes - Changes in fundamental attributes of the scheme and other significant changes like merger of scheme, etc.
SEBI regulations mandate that for such changes investor should be given option for a period of one month without any load to exit from the scheme (if he/she is not in consensus with the change/ merger) and communication regarding same should be sent either by way of physical letter or email id if available in addition to notice ads in newspapers.
There are other scheme changes which don’t need exit option: For example change in exit load, intimation of change in fund manager, change in fund house policies, etc.
Fund houses may publicise such changes through a notice ad in newspapers.
Both categories of changes are usually discussed and internally approved by the Board of Directors so usually there is a logic and rationale and it is ensured that the interest of the investors is not impacted.
Armed with knowledge of these regulations and regular checks, you are better equipped to take decisions pertaining to your mutual fund investments.
THE
ART OF INVESTING
- Advisors must know the KYC process else checking one’s status online becomes tough. Once KYC registration is done, transactions go smoothly.
- Any transaction
done as Mutual Fund investor is confirmed by the fund. It is mandatory to issue a
transaction confirmation within five business days.
- Most Mutual Funds have
mechanisms internally to track customer complaints and resolve them
quickly. If you have a grievance, write to the fund house
- Remain updated
about the changes in the features of the scheme you have invested in like
fundamental attributes of schemes, among others
The writer is head – fixed income, Principal PNB Asset Management Company.
Ms. Kuriakose has over 16 years of experience in dealing, research and fund management. In her previous assignments she has worked with L&T Mutual Fund as AVP (Fixed Income) handling all fixed income funds, Reliance Life Insurance as Fund Manager (Fixed Income) and SBI Mutual as Fund Manager for debt schemes. 
She holds a Post Graduate Diploma in Management from The Indian Institute of Management, Bangalore and holds a Hons. degree in Economics from Lady Shri Ram College, Delhi University
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