Mutual fund investor safety – Incase of mistake or due to blatant violation of rules by a fund house, Can an Indian mutual fund investor get his money back if he loses it ? The question surfaced after recent turmoil of global fund management giant Invesco or Franklin Templeton. Invesco had to pay back $105 million after it forgot to re balance two ETF funds in the US.
In India as per the extant policy and regulations are in place to make Mutual fund houses liable for their mistakes in case such a situation arises. If there is a fundamental violation of the deal between the investor and a mutual fund company, then there are provisions in place to penalize that.
In India, If there is a violation of what is stated in the offer document, investors can claim compensation. In the past, capital markets regulator Sebi has imposed penalties on asset management houses for not adhering to its mandated norms, albeit, the compensations have not been as huge as in the case of Invesco.
For example, recently Sebi slapped a penalty of Rs 5 lakh on ICICI Pru Mutual Fund after it came to light that the ICICI Pru FMCG Fund invested in La Opala Rg, Tara Jewels and V-Guard Industries, which Sebi said cannot be considered as FMCG stocks.