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Recently in India we have found out that a lot of big financial institutions have been cooking their books. And both the auditors and regulators have failed miserably and can not be trusted to do their jobs.

Are the shares bought by the mutual funds held in an independent, third party like a depository or a trust? So that I don't have to completely rely on the mutual fund company and be sure that the my SIPs are used to buy shares and are not diverted and lent to some shady real-estate company or jeweler with very good credit rating.

E.g. I get statments from the depository (NSDL or CDSL) about the shares I purchased through my brokerage account, so I don't have to completely rely on the broker's statment.

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  • IMHO, the bookkeeping is the last thing your concern when you invest in a regulated mutual fund. Many gullible investors simply didn't realise, costs is the biggest enemy. Many mutual funds distract the investor by showing too good to be truth returns to cover up the expensive costs.
    – mootmoot
    Nov 19, 2019 at 15:04

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The mutual fund structure is relatively safe. The actual assets (shares, etc) are held by different legal entity and managed by different entity. The new regulations means brokers can't hold it on your behalf with the fund house. It has to be held in your name.

To be more safe you can have the mutual fund units in your demat account so you are more sure.

This still doesn't rule out a bad investment by fund manager (at times willful) ... Hence choose large reputed fund house, and don't invest everything in in single fund house.

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  • As mentioned by Dheer, one should choose a large reputed fund house in India such as HDFC Bank or others to prevent any fraud from happening.
    – Irfan Shaikh
    Jan 15, 2021 at 7:35

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