The Exit That Took Sixty Days

The default rule is that redemption proceeds must be transferred to the client within 10 working days of a valid redemption request. A blanket 60-working-day timeline for "illiquid portfolios" is not a default entitlement; it is only defensible so far as the disclosure document and the signed agreement set out a specific mechanism for illiquid securities, and even then the delay must be justified, quantified and communicated in writing. Practically, the valid request date needs resolving first: the 3 February email came from a signatory whose authority the firm could not verify until 5 February, so the firm should confirm authority, then treat the confirmed date as the request date and record it. Cash and liquid securities should be settled within the 10 working days rather than held hostage to the unlisted positions. For the unlisted and unsold holdings, the standard route is transfer into the client's demat account with the client's informed consent, at a valuation computed under the disclosed policy, with an undertaking that the manager will continue to assist in monetising them. Silence and delay are the exposures here, not the illiquidity itself.

No. Redemption proceeds must go only to the bank account of the client - here, the company's own verified account - never to a director's personal account, even with written instructions, because that is a third-party payment, conflicts with AML/KYC requirements and exposes the firm to a fraud or misappropriation claim if the funds are not routed onward. The signatory change is the second control point. Before acting on any instruction, the firm must obtain the board resolution appointing the new authorised signatories, their KYC and in-person verification, the updated list of authorised signatories and the revised mandate, and beneficial-ownership information for the company under the applicable PMLA thresholds. Instructions from the earlier signatory, including the 3 February email if that person is no longer authorised, should not be acted upon until authority is established; the firm should acknowledge receipt in writing, explain what it needs, and record the sequence. Speed comes from completing verification, not from bypassing it.

Deductions must be traceable to the agreement and the disclosure document. The distribution fee can be recovered only if it was disclosed and consented to as part of the fee structure, and the manager should show the accrual computation (rate, basis, period) rather than a bare ₹85,000. The exit load is chargeable only if the disclosure document provides for it and the redemption falls within its terms; a 2% exit load must be recomputed against the stated rate and the amount redeemed, and any excess refunded. Neither can be used as a bargaining lever. Withholding the redemption statement until the last rupee of cash arrives is poor practice: the client is entitled to a prompt statement showing what has been paid, what securities have been transferred, valuations used and deductions made. If any charge is genuinely disputed, the firm should give written notice of the set-off right under the agreement and point the client to its grievance redressal process rather than unilaterally netting amounts off.