Sebi asks MFs to give investors option to hold units in demat account

Market regulator Sebi today asked mutual fund (MF) houses to provide investors the option to hold their units under open-ended schemes in demat account, which would help manage their portfolio better.

“MF houses should provide an option to the investors to receive allotment of MF units in their demat account while subscribing to any scheme, be an open ended, close ended or interval scheme,” Sebi said in a circular today.

The regulator has asked the MF units to ensure that such option is provided to the investors in both existing and new schemes from October 1, 2011.

“It has also been observed that often investors’ request for dematerialising their units is rejected as depository participants are not having/ or having incorrect international securities identifying number (ISIN) of each option of the scheme,” Sebi said.

“In this regard, MFs/AMCs are advised to obtain ISIN for each option of the scheme and quote the respective ISIN along with the name of the scheme,

in all statement of account/common account statement (CAS) issued to the investors from October 01, 2011 onwards,” the market regulator said.

According to Sebi, currently many MFs, in case of close-ended schemes, provide an option to hold units either in physical or demat form wherein investors money remains blocked for certain period of time. MF schemes held in demat form is fully transferable.

However, MFs in most cases in open-ended schemes do not offer any such option wherein MFs can issue and investors can redeem units any time during the tenure of the scheme.

“MFs are advised to invariably provide an option to the investors to mention demat account details in the subscription form, in case they desire to hold units in demat form,” Sebi said.

A demat account would help investors view his investments with different fund houses in a single snapshot and not go through several statements issued by these MFs.

Source: http://www.indianexpress.com/news/sebi-asks-mfs-to-give-investors-option-to-hold-units-in-demat-account/793417/2