Recently, the Association of Mutual Funds in India announced that investor complaints have reduced to a trickle. They received only 485 complaints in the first half of 2023. While, prima facie, this seems like a ringing endorsement of the industry, let us see what this case is all about.
Fewer Complaints, But Why?
The drop in complaints is truly remarkable, but several factors could be behind it :
- Improved Service: The mutual fund industry has improved in service and transparency, which may result in lesser problems to investors.
- Higher Investor Sophistication: As the mutual fund investors become more sophisticated, some of the minor problems may get resolved on their own.
- Reluctance to Complain: The complaining process can be viewed as intimidating by some investors, or others may fear some negative fallout, thus underreporting their complaints.
Not All Complaints Are Equal:
AMFI classifies complaints into “routine” and “serious”.
- Routine Complaints: Everyday problems, like delays in account statements, lapses in dividend payment, or errors related to commission.
- Thus, serious complaints could be unethical selling practices, fund irregularities, or even manipulation of the application form.
Complaint Redressal Process at AMFI:
- Routine Complaints: These are normally forwarded by AMFI to the relevant fund houses or distributors for redressal.
- Serious Complaints: AMFI investigates these and has the power to penalize by way of suspending or canceling the distributor license.
Looking Beyond the Numbers
Though the count of complaints comes across as encouraging, the real picture is a bit different:
- Rising Investor Base: The mutual fund industry is rising really fast, with millions of new investors coming on board. Even a small percentage of complaints from such a huge investor base may actually translate into a large number of dissatisfied investors.
- Vigilance at All Times: Therefore, the need of the hour is to combine investor education with simplification of the procedure for filing complaints and ethical behavior on the part of intermediaries.
