Sebi lens on dividend stripping has mutual funds in a bind

Rich investors who poured money into dividend plans of a clutch of equity mutual funds in the last few months are a miffed lot.

Reason: these fund houses are yet to write the hefty dividend cheques they had verbally promised the investors. The dividends would help the investors reduce their tax outgo, a practice known as dividend stripping.

When salespeople of these mutual funds were collecting hundreds of crores from investors with discreet verbal assurances of dividends, few had expected the arrangement to come under the glare of Securities and Exchange Board of India (Sebi).
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