Investor’s rights and obligations

Investor’s rights and obligations

Mutual funds are a popular investment option for investors seeking to diversify their portfolio and reduce risk. As an investor in a mutual fund, you have certain rights and obligations. One of your rights is to receive regular updates on the performance of the mutual fund and the value of your investment. You also have the right to vote on important decisions such as changes to the investment strategy or the appointment of new managers. As an investor, it is important to read the fund prospectus and understand the fees and charges associated with investing in the fund.

Investors also have certain obligations when investing in mutual funds. One of these is to provide accurate information when filling out the account opening form. It is important to disclose your investment objectives and risk tolerance to the fund manager so they can make appropriate investment decisions on your behalf. Another obligation is to regularly review the performance of the mutual fund and make changes to your investment strategy if necessary. It is also important to pay attention to the fees and expenses associated with investing in the fund, as these can eat into your returns over time. In summary, investing in mutual funds comes with both rights and obligations for investors. As an investor, it is important to understand these rights and obligations and to take an active role in managing your investments. By doing so, you can maximize your returns and achieve your long-term financial goals.

Some of the Rights and Obligations of investors are.

  • Investors are mutual, beneficial and proportional owners of the scheme’s assets. The investments are held by the trust in fiduciary capacity (The fiduciary duty is a legal relationship of confidence or trust between two or more parties).
  • In case of dividend declaration, investors have a right to receive the dividend within 30 days of declaration.
  • On redemption request by investors, the AMC must dispatch the redemption proceeds within 10 working days of the request. In case the AMC fails to do so, it has to pay an interest @ 15%. This rate may change from time to time subject to regulations.
  • In case the investor fails to claim the redemption proceeds immediately, then the applicable NAV depends upon when the investor claims the redemption proceeds.
  • Investors can obtain relevant information from the trustees and inspect documents like trust deed, investment management agreement, annual reports, offer documents, etc. They must receive audited annual reports within 6 months from the financial year end.
  • Investors can wind up a scheme or even terminate the AMC if unit holders representing 75% of scheme’s assets pass a resolution to that respect.
  • Investors have a right to be informed about changes in the fundamental attributes of a scheme. Fundamental attributes include type of scheme, investment objectives and policies and terms of issue.
  • Lastly, investors can approach the investor relations officer for grievance redressal. In case the investor does not get appropriate solution, he can approach the investor grievance cell of SEBI. The investor can also sue the trustees.


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