A Personal Hell and Some Lessons Learnt

My worst nightmare just came true.

I have emergency funds parked in ICICI Prudential Overnight fund. After all, my money is where my mouth is. For the last 20 years, I have been a proponent of liquid funds, asking people to park money in them as an alternative to keeping cash. They offer some return and great ease of access as they work on a T +1 basis.

I have been using Coin by zerodha as the platform to transact. They dematerialise mutual fund units which works for me, everything is in CDSL and  I get a consolidated report. Things were working fine until recently.

One fine morning, ICICI Prudential decided to do some Corporate Action on the overnight fund – change the face value/minimum amounts of investment – one of those many useless things Corporations do. They sent an email on the 8th of August telling investors that they will be denied redemptions in the period of 11th to 17th August!!!! And those who have dematerialised units have the option to rematerialise them before this window – because rematerializing is a simple task, like taking a walk in the park or adding an item to your digital cart while shopping.

First of all, I missed the email. It landed in my inbox along with lots of trash that MFs regularly send and went unnoticed. I needed funds and hit the ‘redemption’ button on Coin and got an error message. It was close to 3pm on a Friday so I decided to wait. Monday was independence day, Tuesday was Parsi New Year and a settlement holiday for debt funds so I waited again. On Wednesday I got the same error and when I raised a ticket, I was explained what was going on.

I was surprised and annoyed at how the AMC got past the Regulator with such a thoughtless move.

My horror didn’t end here. CDSL sent me a message that the new set of units at a revised face value had been credited and the old ones were debited. However, I still couldn’t redeem the fund! Why? Coin needed time to make their backend reflect the new ISIN, the new Units and my ’emergency funds’ have currently ‘disappeared’ from my Holdings!

I am told by the good guys at Zerodha that this may take a couple of more days to fix.

So T+1 has run well into a week and I have no idea when I will get the funds, since we are heading into a weekend, I think not before Monday or Tuesday next.

In another country, I may have sued for this stress and demanded compensation. In ours, it isn’t easy. Just like rematerialisation isn’t. I have often been asked to comment on what the Regulator ‘should do’ on issues. I think on this one, they should Show Cause and fine the AMC. What is the blazing need to change Face Value? How does it change an Investor’s life? Have they forgotten that people dematerialise too and what a nightmare this can cause?

There is just too much that these Corporations get away with. I usually have a gentler view on things but denying access of funds to an Investor, for whatever reason – be it mishandling of Credit like in FT’s case or some dumb Corporate action like in ICICI Prudential’s case – must be dealt with a strong hand. Fund Houses must pay for inconveniencing investors in this manner.

This episode has led to a drastic dip of my trust in the system. 

Lesson learnt – No more parking of emergency funds in Mutual Funds for sure and certainly no dematerialising.

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