Regulator regulate this too!
If a company declares a dividend and the customer does not claim it what happens? Well it gets transferred to the Central Government.
What happens in case of a mutual fund where the investor has died and the family does not know about it. Well, er, the fund keeps it. Well technically I may be wrong…
Let us say a 70 year old lady asks for a redemption of her units. Then she goes off on a tour….and the courier goes back saying ‘addressee not found’.
The fund house knows where she is, but is under no LEGAL OBLIGATION to send it again. So they make some half hearted attempt at sending it again. Then again nothing happens. The lady has forgotten about it. (Well she has money from other sources, so she did not bother much, let us say).
The lady may be receiving dividends from another folio, but the fund house is under no obligation to send it to her….so it stays with the fund house…
Let us say she realises her mistake after 15 months. And she writes to them – she will get the money. At the NAV which prevailed 15 months ago.
Does she get today’s NAV? You ought to be joking.
Does she get INTEREST for that period? Well one very very arrogant fund house told me ‘It is her fault’. Well, well it is.
Did they make an attempt to trace her. Half hearted would be a very sweet word.
Did they use the money during this period? You bet they did.
Does SEBI have a view on this? Not sure.
If I were SEBI I would do the following:
1. Stop the fund industry from using words like ‘Monthly Income Plan’ – which is just some smoke and mirrors game of making it look like a Monthly Income Scheme of the Post office.
2. Increase the net worth requirement to be in the mutual fund business and charge Rs. 50 million from each fund house and put it in the investor education fund.
3. Force all fund houses to ensure that they have the bank account numbers, PAN numbers, and current address of all the investors. If they cannot get these details, these folios should be marked as ‘customer not in existence’ and after 3 years transferred to SEBI’s investor education fund.
Well if I were RBI, I would do the same thing with banks….I have heard of one bank which has (hold your breath) about 200k million rupees lying in its balance sheet…..Just think how profitable RBI would be!!
Chandru
Once I redeemed my Fidelity MF. The units got redeemed but money was not credited in my account due to their process of Signature verification, etc., Finally I got my money after 30-40 days. I was paid an interest @ 18% pa from them stating a SEBI guideline.
Ofcourse, it was not my mistake!
pravin
the market exists not to provide fair results.it exists to give you what you truly deserve. ie.show us our “aukaat”. people who dont know how to claim their dividends,well,should get advisors who can do it for them
subra
Pravin not sure whether you are an investor or a distributor – I do not know of any distributor who will do all this diligently always, all the time, for all the clients.
IndianHayek
“2. Increase the net worth requirement to be in the mutual fund business and charge Rs. 50 million from each fund house and put it in the investor education fund.”
All the incumbents of mutual fund industry would love to have SEBI raise networth requirement. Thats the surest way to stop any new competition from coming into the market. Thats what a lot of our corporates spend time/money doing and our govts/regulators are only too willing to do. Raising the entry barriers and exit barriers to start new businesses. Kill competition even before it appears.
“Does she get today’s NAV? You ought to be joking.” – what if there was a crash and NAV was decimated. Won’t she be happy to get it at the previous high NAV ? What if the fund she invested wasted the capital investing into duds? would that be fair ? would you then have the regulators monitor which stocks the fund houses invest in ?
Nothing good comes of any regulations. And certainly not out of “creative” regulations as you suggest.
aclarke
– this is clearly the ladies mistake, every bit of it.
– went on a tour after asking for redemption. Doesn’t she know a check will come in few days ?
– remembered it again after 15 long months ? phew … !
– why should MF give it at current NAV ? MF already redeemed the units/stocks at redemption prices. (also she would’ve got lucky also if markets went down after that as somebody else said.).
– she got what she deserved. No amount of investor education is going to change such irresponsibility.
anon
go growth, mark direct credit to account, BUT then be prepared to chase for transaction statement. online on demand a/c statement is so secretive you cannot open with your own password.
In my experience, tata darashaw were the ONLY R&T who would chase you and send you a missed cheque if you reappeared three months down the line.