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54. Explain the importance of disclosures for a unit holder.
Since various Mutual Funds are sponsored or promoted by the banks, financial institutions, and brokerage houses or financial companies , there is adequate scope for potential conflict of interest between the sponsors and the units holders . As the assets under management of Mutual Funds are rising the stake of small investors is also rising which necessitates a critical evaluation of apparently bona fide actions of the 'trustworthy' asset managers. Thus the disclosures need to be scrutinized in a manner that would reveal their ability to not only make the investors aware of such ''related '' transaction but also empower them to understand the implications of the same .The Fund Manager has the discretion to utilize the funds of the unit holders or the investors and the latter must be able to evaluate if these are indeed bona fide transaction .In case of crossholding an investor must be able to evaluate if these are indeed bona fide transctions. In case of crossholding , an investors must be able to gauge how frequently a Fund has transacted in such securities .An investor must be able to determine if the turnover ratio for this select class of securities is higher than the rest , indicating , probably , the malafide intentions of the corporate unit holder.
Ans; Since various Mutual Funds are sponsored or promoted by banks , financial institution , and brokerage houses or financial companies, there is adequate scope for potential conflict of interest between the sponsors and the unit holders .As the Assets Under Management of Mutual Fund are rising , the stake of small investors is also rising which necessitates a critical evaluation of apparently bona fide actions of the trustworthy asset managers.Thus the disclosures need to be scrutinized in a manner so as to reveal their ability to not only make the investors aware of such '' related '' transaction but also empower them to understand the implications of the same.