How are unclaimed mutual fund redemption and dividend amounts deployed by AMCs, and what payout value does an investor receive if they claim the proceeds after 4 years?

[ A ]Transferred immediately to the Sponsor's revenue account as corporate profits with no future redemption allowed.

[ B ]Deployed in a separate plan of Liquid/Money Market scheme (AMC fee capped at 0.50% p.a.); claims after 3 years are paid based on the NAV at the end of the 3rd year.[ CORRECT ]

[ C ]Distributed equally among all existing employees of the Registrar and Transfer Agent (RTA).

[ D ]Used to purchase volatile small-cap equity derivatives to maximize speculative trading gains.

Takeaway

Option B is correct: Deployed in a separate plan of Liquid/Money Market scheme (AMC fee capped at 0.50% p.a.); claims after 3 years are paid based on the NAV at the end of the 3rd year.

Derivation

SEBI mandates that unclaimed redemption and dividend amounts must be deployed in money market instruments or a dedicated plan of a Liquid scheme where AMC management fees are capped at 0.50% p.a. with zero exit load. If an investor claims within 3 years, payment is based on prevailing NAV (including all accumulated gains). If claimed after 3 years, payout is capped based on the NAV at the end of 3 years, with excess earnings directed to investor education. This tests investor protection norms. A common error is assuming unclaimed funds are forfeited or paid with lifelong compounding.

Why the others fail

A — Transferred immediately to the Sponsor's revenue account as corporate profits with no future redemption allowed.

Unclaimed assets can never be appropriated as Sponsor corporate profits; they remain held in fiduciary trust for unitholders.

C — Distributed equally among all existing employees of the Registrar and Transfer Agent (RTA).

RTA employees have no legal claim on investor assets; funds are strictly regulated under SEBI unclaimed asset frameworks.

D — Used to purchase volatile small-cap equity derivatives to maximize speculative trading gains.

Unclaimed funds must be deployed only in ultra-safe liquid/money market instruments, strictly barring high-risk equity derivatives.