Two different things are often confused under the heading of investor protection. One is protection against misconduct: being misled, having money misused, or being ignored when something goes wrong. The other is protection against losing money because markets fell. The system in India provides a good deal of the first and none of the second. It helps to know where the line is.
The safeguards built into the structure
- Regulation. Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI). Fund houses must be registered and must follow detailed rules on how schemes are run, valued and described.
- Separation of roles. A mutual fund is set up as a trust. Trustees oversee the asset management company on behalf of investors, and a separate custodian holds the scheme’s securities. The fund house does not simply keep your money on its own books.
- Disclosure. Schemes must publish their NAV for every business day, disclose their portfolios periodically and state their costs, risks and riskometer level in the scheme documents.
- Registered intermediaries. Distributors must hold a valid AMFI Registration Number (ARN) and follow the AMFI Code of Conduct. KYC is mandatory for every investor.
- Statements. You receive a confirmation and an account statement from the fund house or its registrar for your transactions, independent of your distributor.
What these safeguards do not do
None of this protects the value of your investment. Regulation does not mean that SEBI or AMFI has approved a scheme as a sound choice for you, and registration of a distributor is not an endorsement of any scheme they discuss. Mutual fund returns are not guaranteed, and a properly run scheme can still lose money.
Precautions that are in your hands
- Verify before you deal. Check a distributor’s ARN on the AMFI website, and confirm the name matches.
- Pay only the mutual fund. Payments go to the scheme through official channels. Do not pay into anyone’s personal account or hand over cash.
- Never share one-time passwords or passwords, and do not sign blank or partly filled forms.
- Read the scheme documents and make sure you understand the risks, costs and exit load before investing.
- Check your statements. Confirm that each transaction appears in a statement from the fund house, with the right scheme, plan and amount.
- Keep your details current. Make sure your own mobile number, email address and bank account are the ones on record, and keep your nomination up to date.
- Be wary of promised returns. Anyone offering fixed or assured returns from a mutual fund is either mistaken or misleading you.
- Ask about commission. A distributor must disclose the commission they receive on schemes they discuss with you.
If something goes wrong: how to complain
Follow the steps in order. Each level expects you to have tried the one before.
- Raise it with the firm you dealt with. If the issue concerns your distributor, write to them. If it concerns a transaction, statement or redemption, the asset management company’s investor service team is usually the right first contact. Put the complaint in writing and keep a copy.
- Escalate within the asset management company. Every fund house has a designated investor relations officer whose contact details are in the scheme documents and on its website.
- Approach AMFI if the complaint is about the conduct of a mutual fund distributor.
- Lodge a complaint on SCORES, SEBI’s online complaints portal at scores.sebi.gov.in, if the matter remains unresolved.
- Use the SMART ODR portal at smartodr.in for online conciliation and arbitration of disputes in the securities market.
Making a complaint effective
- State the facts in order: what happened, on which dates, in which folio and scheme.
- Attach evidence such as statements, transaction confirmations and earlier correspondence.
- Say clearly what you want done.
- Note the reference number you are given and the date, and follow up in writing.
- Do not include passwords or one-time passwords in any complaint.
Complaints about I Tag Financials
If your complaint is about us, write to us or call us first. Our contact details and the full escalation path are on our grievance redressal page. If we do not resolve it, you are free to take it to the asset management company, AMFI, SCORES or SMART ODR as set out above.
Knowing these routes before you need them is part of investing carefully. Most investors never use them, and those who do are far better placed if their records are in order.