Skip to main content

Security tightened for your Mutual Fund investment

MUTUAL fund houses are increasing the security features related to investing in their funds to prevent frauds. One of the measures has been non-acceptance of third party cheques from November 15, 2010.

This will have a significant impact in ensuring investors get the units for the amount that they invest, but the mutual funds are not stopping there. They are also asking investors to change the manner in which they write the cheques at the time of investment so that there is adequate safety present here too.


Fraud: Fraud is one of the worries that investors face while investing in a mutual fund scheme. There have been instances where investors have given the application form with a cheque, but have found that the units have been allotted to someone else even though the money has been withdrawn from their accounts.


This happens because the application form of the investor is switched at the time of making the investment, so while the cheque amount goes from the investors' account, the name, address as well as bank details are of some other investor's.

At present, investors write the name of the scheme when they invest in it. Apart from non-acceptance of third party cheques, funds are now also asking investors to add an additional detail when they write a cheque for investment. There are a few variations in the form of the additional detail that will have to be added, but it has to be noted that all the funds might not allow for all the routes mentioned here.


PAN: Normally an investor writes the name of the scheme on the cheque when they invest their money into a mutual fund.

This process was enough for the amount to be used for the allotment of the units, but now, fund houses are asking for an additional detail beyond the fund name to be written on the cheque.


One of them includes the Permanent Account Number (PAN), which is a unique number for each investor.

Thus, this becomes a distinguishing mark for the investment and hence will be able to ensure that the investment amount is not credited to the folio of some other investor. The PAN of the first investor has to be mentioned and this can also be checked with the details that are recorded with the fund. In this case the details will be written as `ABC scheme a/c ­ XXXXXXXXX'.


Investor's name: Another measure that the mutual fund houses are asking investors to adopt is mentioning the name of the first investor after the name of the scheme in the cheque. This is done to ensure that some other person does not use the cheque for the purpose of depositing it into their account and thus perpetuate a fraud. The mutual fund on its part will credit the units only into the folio of the investor whose name is mentioned on the cheque after the scheme name.

This can be done by mentioning the following details -`ABC scheme a/c -Full name of the investor'.


Folio number: For existing investors the situation can be made easy with the use of the details of the folio number after the name of the scheme in the cheque. This is a number that is allotted to each investor by the mutual fund house when they make an investment with them so that the details can be easily accessed when required.

Existing investors who want to make additional investments with the fund can adopt this route too if the fund allows it and this will be another safety feature.


Again, the mention of the number ensures that the money is not appropriated by someone else even if the cheque falls into their hands and this is precisely what the mutual fund houses want.


This will be written as `ABC scheme a/c ­ Folio No'.

 

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

SBI bonds FAQ

  Maximum retail subscription and over – subscription There is a lot of excitement around these bonds, so I won't be surprised if they get over-subscribed on the first day itself. So, I thought Sameer asked a very good question about over-subscription. Here is that discussion. Here are some other questions that you may find useful. Can I trade the SBI bonds on NSE after it lists? Yes, these can be traded after listing. Where can I get the application forms, and can I buy the bonds online? You can get the application from notified branches, and then fill it up there and submit it. To the best of my knowledge, there is no way to invest in them online, but if anyone knows otherwise then please leave a message, and let us know. Can NRIs apply for these bonds? NRIs can't apply for these bonds as they fall under one of the ineligible categories. Can you take a loan by keeping the SBI bonds as security? The terms of the issue in the prospectus state that the bank shall no...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now