AMCs are looking at calling dormant accounts by another
name.
AMCs are contemplating changing the nomenclature of
‘dormant’ folios which has lately been creating confusion among investors. SEBI
had asked AMCs to send half-yearly consolidated account statements to investors
who have not transacted during a six-month period ended March or September.
AMCs are questioning the logic behind this move. “On one
hand we are talking of long-term investing, and on the other, we are telling
investors that there have been no transactions. Some NRI investors are also
concerned when they see ‘dormant’ in their account statements,” says the
marketing head of a large fund house.
A few AMCs are planning to change the terminology. “We might
call such folios a different name so that there no confusion in the minds of
investors,” says the sales head of a top AMC.
“We are trying to change the terminology. We are mentioning
these folios as ‘inactive’ currently. We are thinking of telling investors that
‘inactive’ doesn’t mean that they have to carry out some transactions or
complete certain formalities. People are equating dormant folios with dormant
bank accounts. The reason for mentioning folios as ‘dormant’ was to keep
investors updated on a half-yearly basis,” says an operations head of a
mid-sized AMC.
Most AMCs call accounts ‘dormant’ while others are calling
them ‘inactive’. AMCs tag the folios as ‘dormant’ if there are no financial
transactions like purchase, redemption, switch, dividend payout, dividend
reinvestment, SIP, SWP, and STPs during a six-month period ended March or
September.
Industry officials say that mentioning ‘dormant’ against
accounts with no transactions is not serving any purpose. They are of the view
that this terminology could be altogether dropped as well. Often investors tend
to forget their investments and many forget their folio numbers. Distributors
tell Cafemutual that some of their clients are worried after noticing the term
‘dormant’ in their statements. A few clients have gone ahead to redeem their
investments.
Source: http://www.cafemutual.com/News/InnerNews.aspx?srno=1546&MainType=New&NewsType=Industry&id=21
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