In a rare case of actually investigating fraudulent misselling, SEBI has managed to trap “agents” who tried to fleece families that had just lost a dear one. A person would call and say that the deceased had invested in mutual funds, but that an additional investment was required in order to receive the full money back. (See press release)
SEBI had received a complaint from an investor (hereinafter referred to as ‘ complainant’) that some unknown persons claiming to be ‘agents’ and ‘brokers’ of Mutual Funds and insurance companies have been contacting the complainant saying that the deceased son of the complainant had invested in Mutual Funds and they are maturing in a short while. In order to get the full amount, the complainant must issue a cheque in advance for a new mutual fund scheme or insurance policy failing which the complainant will lose a substantial portion of the maturity amount as broker commission. The ‘agent’ informed the complainant that the son had made investments in Mutual funds which are about to mature and on maturity the complainant will get only Rs. 5 lacs. However, the ‘agent’ further stated that if the complainant makes a further investment of Rs.2.5 lacs, the complainant will get maturity proceeds to the tune of Rs.12.5 lacs.
In general, if anyone tells you that you need to invest more money to get back money you’ve already invested, it’s likely they are a fraud of some sort. Always be sceptical of all financial agents.
Sadly, SEBI has no powers to arrest the individuals involved. An FIR has been filed, and I hope that they are able to put these people behind bars. At the very least, SEBI should immediately
a) cancel their mutual fund ARN.
b) If they have actually made people invest in mutual funds, withhold all commissions and get the mutual fund AMCs to refund the money.
c) Fine the individuals 10x of the money they collected, in order to ensure that others are deterred from doing this in the future.
Let’s see how the case turns out. I don’t expect fireworks, but I’m prepared to be pleasantly surprised.