That's the question foremost in the minds of thousands of investors who got a rude shock when UTI decided to prematurely redeem its Rajlakshmi Unit Scheme 1992 (RUS  1992).

According to reports appearing in leading dailies, the market watchdog  the Securities and Exchange Board of India (SEBI) is looking into the premature redemption by the Unit Trust of India (UTI) of its Rajlakshmi Unit Scheme 1992 (RUS  1992).

First the facts. Investors in RUS 92 feel shortchanged (and rightly so) with the premature redemption of RUS-92, given the fact that the application form of the scheme categorically stated that maturity value would not be touched till its handed over to the beneficiary and that it was an irrevocable gift. Investors feeling let down, have complained to SEBI about UTI failing to mention an exit clause in the application form.

UTI countered by saying that the offer document mentioned the exit clause to investors, although the four-page application form didn't. Interestingly, however, news reports indicate that nowhere in the application form is there any mention of an offer document at all and in the application format there is only a statement saying that investor has read the brochure and is applying for the units.

P S Subramanyam, UTI chairman, believes that the application form cannot be viewed in isolation and must be read along with the offer document (which does not seem to exist). Another senior official at UTI said that application form only highlights the important features of a scheme and other provisions are available at request.

What one fails to understand is that if the premature termination clause is not an important feature then what is! The termination clause is definitely something the investor would like to see in the application form. Many investors can now argue that if the termination clause had been sufficiently highlighted in the application form of RUS  92, they would have done a rethink about their investments. Many investors can now also argue that how come UTI considered the termination clause important enough to be highlighted in the application form of RUS  2 (successo's RUS 92) but not in RUS  92 itself? Can investors be faulted for feeling that terms like irrevocable gift gives the scheme an assured return halo?

The ball is now very much in SEBI's court. It's a different matter that legally UTI's schemes don't come under SEBI's purview. But in the past SEBI has dealt with funds for violating their assured return undertaking even while the fund was not originally registered with SEBI. It remains to be seen whether SEBI will choose to act on that precedent.

As far as investors are concerned, it's a sad story. Investors flock to UTI's schemes because they feel that the government connection will ensure safety of investments and returns, but in the case of RUS-92, it seems this very government connection may well shatter their hopes.

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