AMCs are looking at calling dormant accounts by another name.
AMCs are contemplating changing the nomenclature of ‘dormant’ folios which has lately been creating confusion among investors. SEBI had asked AMCs to send half-yearly consolidated account statements to investors who have not transacted during a six-month period ended March or September.
AMCs are questioning the logic behind this move. “On one hand we are talking of long-term investing, and on the other, we are telling investors that there have been no transactions. Some NRI investors are also concerned when they see ‘dormant’ in their account statements,” says the marketing head of a large fund house.
A few AMCs are planning to change the terminology. “We might call such folios a different name so that there no confusion in the minds of investors,” says the sales head of a top AMC.
“We are trying to change the terminology. We are mentioning these folios as ‘inactive’ currently. We are thinking of telling investors that ‘inactive’ doesn’t mean that they have to carry out some transactions or complete certain formalities. People are equating dormant folios with dormant bank accounts. The reason for mentioning folios as ‘dormant’ was to keep investors updated on a half-yearly basis,” says an operations head of a mid-sized AMC.
Most AMCs call accounts ‘dormant’ while others are calling them ‘inactive’. AMCs tag the folios as ‘dormant’ if there are no financial transactions like purchase, redemption, switch, dividend payout, dividend reinvestment, SIP, SWP, and STPs during a six-month period ended March or September.
Industry officials say that mentioning ‘dormant’ against accounts with no transactions is not serving any purpose. They are of the view that this terminology could be altogether dropped as well. Often investors tend to forget their investments and many forget their folio numbers. Distributors tell Cafemutual that some of their clients are worried after noticing the term ‘dormant’ in their statements. A few clients have gone ahead to redeem their investments.
