Can you sell units of shuttered MF schemes easily on exchanges?

 The answers to these questions can be tricky. 

Let us have a look at the permissions given by SEBI. Many interpreted that these were to help investors in the six debt schemes of Franklin Templeton MF. The house had shut down six of its debt schemes in the recent past, citing the poor liquidity in the market as the reason behind this move. As per new guidelines by SEBI, the units of those schemes that are in the process of being wound up need to be listed on stock exchanges. On the other hand, trading on these stock exchanges is not compulsory. Investors are free to choose the AMC to complete their liquidation and refund process. 

In the trading option, there are multiple roadblocks for MF investors. Though it is a pleasant fact that investors can exercise the option, it is not very easy. Many investors do not have a DEMAT account. Even if they make one, the process of trading is not as simple as one would have thought of, when compared to investing in mutual funds. Thus, this becomes a tedious process for investors. 

Here is a closer look at the process. Investors will first have to dematerialize the units or transfer them to their DEMAT account. They will also have to obtain a conversion request form from the DP. A statement of accounts, which will include the name of MF units that are to be converted to the DEMAT form, will also have to be attached to the above form. The duly completed form should then be submitted to the DP, along with other documents, for successful conversion.

Post this, investors would require a broking account to sell the units on an exchange. Though a broker can help you to get a matching quote, this would imply spending more money. 

Direst MF investors who have no help will find these steps to be extra troublesome. Those with an advisor might be able to get some help with regards to the entire process. 

Investors also face the issue of not having a lot of takers for the unit of shuttered schemes. Even when one goes to trade these units, that usually happens when the scheme has been wound up, and the news has spread. There are no potential buyers for such units in the market. Thus, for retail investors, this entire effort of following the process and trading might be a futile act. 

With a lack of buyers also comes the issue of the selling price. Financial planners know as a fact that since there are no buyers for these units on the exchange, potential one will quote reduced prices for the same. With very few people, if at all available, to buy these units, one will have to sell these off at low prices, which then leads to a loss in the investment amount.

Investors should try and control their urge to sell their units, if they can, and stick to AMC. The AMC will continue to pay you the money that they receive in parts. However, if you are well acquainted with the exchange trading process, and you are sure that you can get a good price, definitely go ahead and sell these units by all means.