How easy it will be for investors?
According to the new SEBI rule, the units of shattered schemes can be listed on the stock exchange. However, trading won’t be mandatory as the investors are free to opt for AMC for completing the liquidation and refund process. Though there would be few roadblocks for retail mutual fund investors as exercising this option is not very easy. As many investors don’t have a Demat account. Even if you create one, it will be a tedious process for investors because the trading process completely different from investing in mutual funds.
Let’s look at the whole process. First, investors need to dematerialise the units or transfer them in Demat Account. For that, Investors need to get CRF (Conversion request form) from the DP (Depository Participant). For Demat Conversion Form: The names of mutual funds units to be converted along with the Account statement needs to be attached with the Conversion Request Form. The duly completed form along with other required documents need to be submitted to the depository participant for conversion. The depository will submit the form to the asset management company or RTA ( registrar and transfer agent) to confirm the conversion request after verification.
After this, investors need a broking account to sell the dematerialised units on an exchange. They can hire a broker for matching quotes in the market. But that would mean spending more money.
These roadblocks would be more difficult to overcome by direct mutual funds investors with no help. Unless they know any advisor to help them in getting through the process.
Another major problem investors can face on an exchange is the unavailability of potential buyers. As there won’t be many traders for shuttered schemes units. Then comes another hurdle of selling units at a very low price due to the lack of buyers. And since financial planners believe that no one would want to buy the units on schemes, potential buyers can quote for these units at a very low price. It means investors might incur losses on investments.
However, all these are the possibilities of incurring losses, but overall the process is very easy. It is also advised if investors can hold onto their units then it is best advised not to sell and stick to the AMC. As the AMC will keep paying money they receive in parts. So, if you are not countering any emergency then waiting and letting the AMC returning your money would be recommended. However, if you are well versed with exchange trading and getting a good price, then by all means sell the units.