Why Is It Important To Know Your Rights & Responsibilities As An Investor?
Whether you invest in equity stocks, mutual funds, real estate, or insurance plans, every investment is governed by specific rules and regulations set up by authorised governing bodies.
Feb 2022
4 mins read
Share:
Have a look –
| Type Of Investment | Governing Body |
| Capital market securities like stocks, mutual fund investments, etc. | Securities and Exchange Board of India (SEBI) |
| Fixed deposits, recurring deposits, or any other investment with banks, Government securities and foreign exchange | Reserve Bank of India (RBI) |
| Insurance policies | Insurance Regulatory and Development Authority of India (IRDAI) |
| National Pension System (NPS) and other pension plans | Pension Fund Regulatory and Development Authority(PFRDA) |
| Real Estate | Real Estate Regulatory Authority (RERA) |
Each of these governing bodies has stipulated the rights and responsibilities of investors. These rights and responsibilities depict –
- Your right as an investor
- The services that you can rightfully expect from the concerned institutions
- The risks involved
- The charges and costs associated with the investment
- The benefits that you can get from the asset
- The legal framework
- The scheme related information
Moreover, the rights and responsibilities also outline the obligations that you, as an investor, have with respect to the investment. Investor rights and responsibilities form a part of the fine print, which is, most often than not, overlooked. How often do you read the fine print?
Why Should You Know Your Rights and Responsibilities as an Investor?
Here are some reasons why knowing your rights and responsibilities is essential when you invest in different assets –
- To Avoid Disputes and Grievances
The Bombay Stock Exchange (BSE) reportedly received 362 complaints from investors in December 2021 against 207 companies1. These complaints were mainly due to non-receipt of shares and debt securities, a common investors' right. Investor disputes and grievances are, thus, a common affair. However, when you know your rights, you can demand the required services from financial institutions for your investments. For example, you can request a schedule of charges, expected returns, the risk profile, etc., to understand the investment better.
Just like rights outline what you can expect, the responsibilities outline what is expected of you as an investor.
Knowing rights and responsibilities brings transparency and clarity, which goes a long way in avoiding disputes and grievances.
● To Know the Grievance Redressal Mechanism
The grievance redressal mechanism is an integral part of investor relations. Every institution (selling or dealing in the asset involved) has a redressal system that can be accessed whenever investors are dissatisfied with the services received.
Knowledge of your rights helps you understand the grievance redressal process well, helping you escalate your grievances quickly following proper channels and protocols.
● To Understand What to Expect from the Investment
Every investment is different and has a specific benefit structure. Knowledge of the benefit structure helps you understand the expected returns from the investment and the risk profile. Investment planning, thus, becomes easier as you can align the investments with your financial goals.
● To Avoid Falling Prey to Mis-selling
As per IRDAI's report, private life insurers received 35,178 mis-selling complaints in FY 2019-20[2]. Many banks too have been penalised by the RBI for mis-selling investment products to customers without fully disclosing their risk.
Mis-selling is, thus, a common ailment in the investment world. To avoid falling prey, you need to be informed and vigilant. Knowing your rights and demanding accurate information helps you avoid unfair selling practices and invest in avenues that fit your needs.
● To Understand what is Expected from You
Though financial institutions have to comply with investors' rights, investors too have an obligation to fulfil at their end. This is where the responsibility aspect kicks in. Knowledge of your responsibilities helps you comply with the necessary and mandatory requirements of the investment. For instance, KYC (Know Your Customer) compliance is a must for investing. It is your responsibility to provide your correct KYC documents to invest. Similarly, you are expected to read the scheme-related details comprehensively before investing. Not doing so and then raising a dispute does not work in your favour.
You should, thus, know your responsibilities as an investor so that you can take the desired steps to fulfil them.
● To Safeguard your Money and Investments
Lastly, and most importantly, knowledge of investor rights and responsibilities makes you more vigilant with your money. When you are knowledgeable, you can pick the right investment avenues after understanding them inside out. Your money is, thus, rightly handled, invested and redeemed for maximum gains.
How to Learn your Rights and Responsibilities as an Investor?
- Read and understand the details of the investment.
- Find out the charges, commission, fees, etc., associated with the asset and also keep abreast of any updates therein.
- Check the license of any relationship manager, agent, distributor or intermediary selling the investment. Buy the investment only from licensed and regulated intermediaries.
- Understand the grievance redressal mechanism and keep the contact details of the relevant authorities handy.
- Check the email and SMS alerts shared by concerned institutions. Subscribe to this service (if you haven't) to keep track of your investments.
- Check the periodic statements, reports and fund updates.
- Be aware of the tax implications of your investments, both at the time of buying and selling.
A little knowledge is a dangerous thing, goes a phrase in Alexander Pope's poem 'An Essay on Criticism'. Though the phrase was coined in 1709, it is relevant even today.
To understand investment planning, you cannot afford to have a little knowledge as it might prove counterproductive to your portfolio. So, as an investor, know your rights and responsibilities to become a knowledgeable investor with a keen eye to help manage investments efficiently.
Sources:
Share:
PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
The information contained herein is provided by PGIM India Asset Management Private Limited (the AMC)
on the basis of publicly available information, internally developed data and other third-party
sources believed to be reliable. However, the AMC cannot guarantee the accuracy of such information,
assure its completeness, or warrant such information will not be changed. The information contained
herein is current as of the date of issuance* (or such earlier date as referenced herein) and is
subject to change without notice. The AMC has no obligation to update any or all of such
information; nor does the AMC make any express or implied warranties or representations
as to its completeness or accuracy. There can be no assurance that any forecast made
herein will be actually realized. These materials do not take into account individual
investor's objectives, needs or circumstances or the suitability of any securities,
financial instruments or investment strategies described herein for particular investor. Hence,
each investor is advised to consult his or her own professional investment / tax advisor / consultant for advice in this regard.
The information contained herein is provided on the basis of and subject to the explanations, caveats and warnings set out elsewhere herein.
The views of the Fund Manager should not be construed as an advice and investors must make their own investment decisions regarding investment/ disinvestment in securities market and/or suitability of
the fund based on their specific investment objectives and financial positions and using such independent advisors as they believe necessary.
