There are certain measures taken by mutual funds to insure safety of investors' money. Some may appear causing inconvenience, but at the core is the objective of protection from possible fraud. Read on ...
Measures for safety of mutual fund investors
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The English translation of the article is as under:
Another safety feature in
mutual funds
Ramesh had shifted to another location due to change of job.
Incidentally, the new job also meant that the salary account changed to another
bank. In the hurry of shifting to another location, and that too of one’s
choice, Rameshthis person wanted to finish all the tasks at the earliest. One
of the tasks was to close to bank accounts. He closed his bank account before
shifting to the new location.
On reaching the new location, he needed some funds for buying a
house to stay as well as for renovation. He opened his mutual fund account
statement and checked the balance. He had more than enough money for the
requirement. However, in the mutual fund folio, the old bank account was linked
and it carried the old address. Ramesh filled in the details in the redemption
slip for withdrawal of required amount of money. In the same form, he also
filled in the details for change of bank account and change of address.
Three days later, he checked his bank account to see if the money
was credited. He was disappointed that it had yet not happened. He called up
the call centre of the fund house only to be informed that it would take longer
time. Ramesh was angry and asked for the reason for the delay.
The reason was simple, yet Ramesh could not understand. The fund
house kept the redemption on hold since there were three simultaneous
transactions, viz., redemption from the fund, change of bank details and change
of address.
While someone may consider this as an inconvenience, this was done
for the safety of the investor’s funds. Let us understand this statement.
When someone wants to fraudulently take out money from someone
else’s mutual fund account, the only way to do so is to change the bank account
and address. As a normal procedure, the mutual funds send the funds directly to
the investor’s bank account or the payment instrument (DD or a pay order)
carries the bank account number of the investors as a safety mechanism. Hence,
even if someone copies the signature and files for redemption, one cannot take
the money out. The intimation of the redemption would also go to the investor’s
registered address. That is why a fraudster must change both these along with
the redemption request.
How do the fund houses know whether this is a genuine request or a
fraud?
That is why they do not process the requests immediately and often
they use other means of verification to ensure the money goes only to the
investor’s account. That prevents a fraud from happening against the investor.
It is not an inconvenience, but a safety feature.
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