Dormant, Deactivated, mutual fund account – not easy to understand please…

 

In a country where English is spoken only by the elite, SEBI has done another very unnecessary thing. However, I am not criticising the regulator, just stating the facts.

SEBI in its wisdom decided that all mutual fund accounts in which there has been no activity for the past 6 months will be called dormant. Fantastic, classify it. What is the earth shattering need to write to the unit holder (at his expense – legally required letter) and tell him his account his dormant? No clue.

But when a regulator says something, you do it. So a huge expense was incurred intimating all the people that their account is now dormant. I have accounts like Franklin India Bluechip / Franklin Tax shield where I have invested 10 years ago. Luckily I guess I know that dormant – does not mean the fund manager has gone to sleep.

So there has been a panic by investors, IFAs have come together to issue a clarification…..but the damage has been done.  Business Standard has done an article, not sure where else I saw an article, but yes the media has made some noise about it, generally.

But it has had a good effect also. A friend called to say ‘I suddenly found a statement showing Rs. 93,000 in a fund…what should I do?’ I said redeem it and put it into one of the funds in which you are doing a SIP..makes no sense to keep in a place where you do not know what is happening.

That brings us to a question. If a customer has invested in a growth scheme, has changed house, had not given his PAN number and then died – what happens to the money? It is jam money for the fund house. They can always it is a liability (it is) and not worry about it at all.

If at all Sebi should FORCE asset management companies to update ALL FOLIOS with the latest address, Kyc, nomination, etc. – in fact it should be an industry wide exercise and Cams and Karvy should BE FORCED to do this.

Who will bear the cost of this exercise? the asset management companies – out of the TRAIL commission that they have saved. Those folios where the owner cannot be found there should be a news paper ad….if there is still no response…the money should be redeemed and kept in a bank account earning interest of say 5%p.a. ….after another 5 years it should be transferred to a SEBI’s investor education account.

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6 Responses to “Dormant, Deactivated, mutual fund account – not easy to understand please…”

  1. I must thank them for this act of kindness. I was not aware of some stray investments of past. Now I have encashed these and re invested in the normal folios I track.
    Regards

  2. “Long term investment” but called “dormant” is a joke/oxymoron. Money is silently working there even if no fresh activity.
    Also How will MF know if a person has died ? Even if no activity for 10/20/30 years doesnt mean, he has died. He would’ve just kept invested deliberately or otherwise. Also even if he died shouldnt they give it to nominee / legal heir ?

  3. Hi Subra Sir, just a question came to my mind. I see lot of good suggestions coming from you which can benefit investors. So why you do not try to utilize your skills by joining some regulator board (I know you do not have time and also have enough money but for Public services, we need people like you who can make the World better place to live)

  4. Subra,

    found a similar folio of my dad who had passed away a few years ago, luckily mother is joint holder but the hassle being created to get it changed to my mothers name from an era of no PAN, different address, different bank account ( weird requirement of bank certifying my mother is the same person when she is KYC compliant, has a PAN but they want the old bank to certify and that account is closed) and they want an original statement from their end – why because there can be a chance of fraud – so we have to prove we own it by showing an original statement – I cant fight this system anymore and logic is no tool with such fools….

  5. @Deepak, there is a saying “If it pays too much to live by the rules, then find a shortcut”. After my father died, when the fund house told us the methods to get the folio changed to our names, we found the rules very onerous. We simply used a redemption slip & put father’s signature & there you go. We deposited the cheque in father’s account which had proper nomination and we had no problems.

  6. I thought, if there is no activity in savings bank account linked to MF folio, then that folio is dormant.

    Is it not?

    You can’t expect to do transaction in each folio every 6 months.

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