Know Your Rights as a Mutual Fund Investor in India

Fri, 23 May 2025

4 mins

Mutual Funds

Did you know that as a mutual fund investor in India, you’re entitled to a set of rights designed to protect your investments and ensure transparency?

Understanding these rights helps you make informed decisions, hold AMCs accountable, and navigate the mutual fund ecosystem with confidence.

• Key Takeaways

  As a Mutual fund investor you are entitled to:

  • Right to Change the Distributor
  • Right to Inspect Key Documents
  • Right to Grievance Redressal
  • Right to Beneficial Ownership
  • Right to Appoint Nominees
  • Right to Pledge Mutual Fund Units
  • Right to Exit in Case of Change in Fundamental Attributes
  • Right to Terminate an AMC or Wind Up a Scheme

• These investor rights can broadly be classified into two categories

  • AMC-related rights
  • Fund-related rights

  Let’s explore them in detail.

• 1. Rights Related to Asset Management Companies (AMCs)

  Right to Change the Distributor

   

  Investors can change their distributor or switch to direct investing by submitting a written request to the AMC. The AMC cannot ask for a No Objection Certificate from the existing distributor.
  
  Right to Inspect Key Documents

  • Trust Deed
  • Investment Management Agreement
  • Custodial Services Agreement
  • RTA Agreement
  • Memorandum & Articles of Association of the AMC

   

  Right to Grievance Redressal
  
  There is a formal grievance redressal policy for investors. SEBI has mandated that the status of complaints redressed should be published by each AMC in their annual report. The same should be available on the website of the mutual fund and on AMFI’s website.
  
  It should provide the status of the number of complaints received by the AMC, the time taken to resolve the complaints and the status of pending complaints.
  
  The scheme related documents also have details of the number of complaints received and their disposal.

• 2. Rights Related to Mutual Fund Units and Schemes

  Right to Beneficial Ownership
  
  Unit-holders have a proportionate right to the beneficial ownership of the assets of the scheme. The investor can ask for a Unit Certificate for his Unit-holding. Investors also have the option to receive an allotment of mutual fund units of open ended and closed end schemes in their demat account.
  
  The mutual fund/AMC is bound to co-ordinate with the RTA and Depository to facilitate this. Units of all mutual fund schemes held in the dematerialised form are freely transferable.
  
  Right to Appoint Nominees
  
  You can appoint up to three nominees and specify their individual share percentages.
  If unspecified, the units are divided equally among the nominees.
  
  Right to Pledge Mutual Fund Units
  
  You can pledge mutual fund units as collateral — often used as security when borrowing from financial institutions.
  
  Right to Exit in Case of Change in Fundamental Attributes
  
  If the AMC changes key scheme attributes (like investment objective, fees, etc.), you have the right to exit the scheme at the prevailing NAV without any exit load.
  
  The exit window must remain open for at least 30 days. The AMC has to send a written communication about the change in fundamental attributes of a scheme to all the unitholders and have to advertise about the change in fundamental attribute in an English daily newspaper having nationwide circulation and, in a newspaper, published in the language of the region where the head office of the mutual fund is located.
  
  Right to Terminate an AMC or Wind Up a Scheme
  
  75 percent of unitholders can terminate the appointment of an AMC. Also, 75 percent of the unitholders (unitholding) can pass a resolution to wind up a scheme. The Trustees are bound to obtain the consent of the unit-holders:

  • Whenever required to do so by SEBI, in the interest of the unit-holders.
  • Whenever required to do so by 75 percent of the unit-holders (in practice, Unit- holding) of the scheme.
  • When the majority of the trustees decide to wind up a scheme or prematurely redeem the units of a close ended scheme.

   

  If an investor feels that the trustees have not fulfilled their obligations, then he can file a suit against the trustees for breach of trust. Under the law, a trust is a notional entity, therefore investors cannot sue the trust but they can file suits against trustees.
  
  Right to Unclaimed Amounts
  
  AMC is expected to make a continuous effort to remind the investors through letters to claim their dues. The Annual Report has to mention the unclaimed amount and the number of such investors for each scheme. Recovery of unclaimed amounts by the investors is as follows:

  • If the investor claims the money within 3 years, then payment is based on prevailing NAV i.e., after adding the income earned on the unclaimed money.
  • If the investor claims the money after 3 years, then payment is based on the NAV at the end of 3 years.

   

  These unclaimed amounts are deployed in a separate liquid plan. AMCs can charge a max 0.50% annual fee on managing such funds.

• 3. Rights to Access Information and Disclosures

  Account Statements and Portfolio Disclosure
  
  As a Mutual fund investor you have the right to receive:

  • Regular account statements
  • Portfolio disclosures (including debt and money market securities) SEBI mandates daily disclosures (with a 15-day lag) in a standard format to increase transparency.

   

  Proceeds of Illiquid Securities
  
  If a scheme had marked certain securities as non-recoverable during maturity but later recovers a higher amount:

  • If recovered within 2 years and is substantial, the proceeds go to old investors.
  • Otherwise, the amount is transferred to the Investor Education Fund maintained by mutual funds.

• Final Thoughts

  Investor awareness is the first step toward protection. Knowing your rights as a mutual fund investor helps you make informed decisions and stay in control of your financial journey.
  
  At InCred Premier, we’re here to guide you with the right tools and insights. Ask your Relationship Manager at InCred Premier  to know more, or open your account today for a curated investment experience tailored to your goals.