Here is an actual situation that has happened with one of my clients who stays in a B-15 town.
Client submits 6 applications to 3 different RTAs in a TIER 2 / TIER 3 City – before 3 pm on 17-Dec for an amount of Rs.2.5 lakhs in 6 different equity schemes.
Funds applied for were:
a. Franklin India Smaller Companies Fund – allotted on 20-Dec – RTA - FT
b. Franklin India High Growth Companies Fund - Allotted on 20-Dec – RTA - FT
c. IDFC Sterling Equity Fund - Allotted on 20-Dec – RTA - CAMS
d. SBI Emerging Businesses Fund - Allotted on 20-Dec – RTA - CAMS
e. Religare Small N Midcap Fund - allotted on 24Dec – RTA - Karvy
f. Reliance Long Term Equity Fund - Allotted on 24-Dec – RTA - Karvy
Queries arising out of the above
1. Should not the dates of allotment of units be the same for all funds?
2. Why are the dates of allotment different for different RTAs?
3. In case of undue delay, is there any recourse available to the investor against the delaying mutual fund / banker? Please note that none of the records are available to the investor other than the time stamped acknowledgement of the RTA.
4. As SEBI's Circular no. CIR/IMD/DF/21/2012 dated September 13, 2012 and SEBI (Mutual Funds) (Second Amendment) Regulations, 2012 notified vide notification No. LAD-NRO/GN/2012-13/17/21502 dated September 26, 2012) state that the time of credit to the respective scheme bank account will the moment for NAV applicability, what is the relevance of time stamping
and NAV for a purchase request above Rs. 2 lakhs in this context?
5. In the last two cases, we are unable to verify / match the respective fund NAVs from the data available on the AMFI site, on which the funds are supposed to upload the NAVs daily by 9 pm.
6. How is it that Karvy received the funds later than the other two RTAs, though the documents were lodged at the same TIER 2 city?
7. Is the investor in a TIER 2 city a second class citizen? Clearance for cheques takes longer not out of his choice, but due to the inherent inadequacies of the banking system!!!
In the above case, the investor’s reaction is that this would be his last foray into mutual funds. In my opinion, this move by SEBI supported whole heartedly by AMFI seem to have added one more nail to the coffin to systematically eliminate investors in mutual funds. The beneficiary of all these so called investor protection moves seem to be aimed at filling the coffers of the AMCs and pointedly detrimental to the investor.
So far, if payments were dishonoured, the credit of units credited to an investor was reversed. Any way, there was no recourse to recovery of costs from the investor. The availability of credit is a misnomer, as the daily cash flows, unless substantial, are generally reflected as part of the
cash holdings for the respective fund.
My suggestion is to revert to the old system for investments below a threshold of Rs. 25 lakhs, and have a penalty on the investor if cheques are dishonoured