Sebi allows unclaim dividend to invest in liquid funds
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Sebi allows unclaim dividend to invest in liquid funds

 PTI   
  • February 26, 2016  
  • |  
  • UPDATED   11:20 IST

To check mis-selling of mutual funds, markets regulator Sebi today allowed unclaimed redemption and dividend amounts to be invested in a separate plan of liquid scheme floated by fund houses specifically for deployment of such amounts. Asset management companies (AMCs) will not be permitted to charge any exit load in this plan and total expense ratio of such plan will be capped at 50 bps.

Currently, mutual funds (MFs) deploy unclaimed dividend amount in call money market or money market instruments only. Investors who claim these amounts during a period of three years from the due date are paid at the prevailing Net Asset Value (NAV). Besides, AMCs are allowed to charge a management fee of up to 50 basis points on such unclaimed amounts.

In a circular issued today, Sebi said that investors who claim the unclaimed amounts during a period of three years from the due date will be paid initial unclaimed amount along-with the income earned on its deployment. Those who claim these amounts after three years, will be paid initial unclaimed amount along-with the income earned on its deployment till the end of the third year.

After the third year, the income earned on such unclaimed amounts will be used for the purpose of investor education. "The unclaimed redemption and dividend amounts...shall also be allowed to be invested in a separate plan of Liquid scheme/Money Market MF scheme floated by MFs specifically for deployment of the unclaimed amounts," Securities and Exchange Board of India (Sebi) said. The new morms will be effective from April 1, 2016, it added.

To ensure MFs play a pro-active role in tracing the rightful owner of the unclaimed amounts, fund houses and industry body Amfi will be required to disclose on their website, the list of names and addresses of investors in whose folios there are unclaimed amounts. The website of MFs and Amfi will also provide information on the process of claiming the unclaimed amount and the necessary documents required for the same.

Further, the information on unclaimed amount along with its prevailing value will be separately disclosed to investors through the periodic statement of accounts sent to investors. With effect from today, simple and performing mutual fund schemes will also comprise of retirement benefit funds having tax benefits and liquid/money market schemes.