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KNOW YOUR RIGHTS AS AN INVESTOR

November 19, 2020by Nicholas Kabaso0

Randy Thurman’s sense of humor does not miss regular investment coffee chats.

 “The broker said the stock was “poised to move.” Silly me, I thought he meant up!”

Evidently, investors are no different from any other consumer on the market. As stated in my last article you always need to carefully “read the label” of your chosen unit trust. Therefore, what are some of your rights?

NOTE: This article may not exhaust the whole universe of what you can count on as your rights but it speaks very broadly to some of the fundamental rights that are generally accepted within capital markets.

  1. Right to Fair Treatment: You have the right to be treated with courtesy. “Really?!”…Of course yes! Treating customers fairly forms an integral part of any business culture. Investors should not be unfairly discriminated against on grounds such as investment amount, gender, age, religion and physical ability when obtaining investment services either as existing or potential investors. Additionally, no investor shall be subject to unfair business or marketing practices, coercive contractual terms or misleading representations. As an investor you have the right to be provided with clear information and being kept informed before, during and after point-of-sale. Further, you have the right to be provided with products that perform as firms have led you to expect, and the associated service being both of an acceptable standard and as they have been led you to expect.
  1. Right to Information: All investors have the right to know changes in key personnel of their Fund Management Company, Financial Results of the entity, commissions/brokerage fees paid for execution of transactions in securities, management fees, custodian, Audit Fees, Directors Fees, penalties incurred or any pending litigation proceedings, major findings of inspections or investigations for which actions may have been taken against the Fund Manager, Trustee, Sponsors or its associates.
  2. Right to understand risks: Risk categories may vary from High, Medium to Low, depending on the asset class that the Investment Manager has created. As an investor you have the right to understand the risks that you are entertaining when you make your investment. Brokers, Fund Managers and other Issuers of Capital instruments will always provide the required disclosure through their advertisements, prospectus, fact sheets or any other relevant scheme documents.
  3. Right to understand Scheme True to its Label: All investors have the rights to fully understand and inspect constitutive scheme documents and assess whether the scheme investment strategy and asset allocation are as prescribed in such constitutive documents. Such disclosures will also be availed in annual reports or other scheme correspondence provided to investors on a periodic basis.
  4. Right to know Schemes’ Investments, Portfolio, Expenses and Accounts: Most Unit Trust work on the Net Asset Value model. As such your respective Fund Manager will daily upload unit prices that are being used on that trading day. Most Fund Managers close trading at 16:00 hours every day from Monday to Friday. Using the Fact Sheets, Half Yearly Unaudited Results as well as Annual Reports most Portfolio Managers are required to regularly update their investors on what is happening on their portfolios. The Annual Report is usually sent to all investors. An investor has the right to request a hard / soft copy any time. An investor can also expect maintenance of appropriate and complete records of portfolio investments of the scheme. This may include current value of the scheme portfolio, expenses charged to the scheme, appropriate disclosure of expenses charged and scheme accounting.
  5. Right to Vote: As an investor and first unit trust holder, you have one vote in respect of every resolution and in certain cases your rights will be the number of unit/shares as a proportion of the value of all the units/shares in issue at a given cutoff date as advised by the Fund Manager. 
  6. An Investor’s Right to Change their Mind: Exercising a cancellation right allows the investor to be released from the contract – though they may still suffer any negative market movement that occurs over the period (to avoid potential for people to abuse cancellation rights to achieve quick no-risk profits), and may still be required to pay any appropriate charges relating to the service provided during the period. 
  7. Right to Terminate Appointment of Asset Management Company: Investors have the right to terminate the appointment of an asset management company if 75% of the eligible votes of the scheme are in favor of such a motion.
  8. Right to Complain: All investors have the right to grievance redressal. As such investors may at any given point in time seek to attest if the Investment Manager has a policy in place that will ideally contain how queries and complaints will be handled, the escalation matrix, bifurcation of queries/complaints and disclosure on the lead times on query/complaint resolutions.

In view of the foregoing and though not very exhaustive, I will leave you to mull over Benjamin Franklin’s words “An investment in knowledge pays the best interest!” Therefore, do not gamble over your investment plans always seek advice from licensed investment practitioners.

~ First issued via the Zambia Daily Mail January 23, 2020

Nicholas Kabaso

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