Will the nominee appointed by an IFA get (and continue to get) all the trail brokerage, after the death of an IFA? Is it a rule that the nominee should be AMFI qualified or NISM qualified? Does the nominee need to furnish self declaration every year? If in the changed scenario, IFA is not willing to continue in the distribution business, therefore not willing to renew his/her ARN, whether the non-renewal will affect the payment of trail commission on the existing business that he has done?
- Santosh Roy Mumbai
You have asked a very valid question.
If you have appointed your nominee who is also a valid ARN holder then the nominee will continue to get the trail commission. The business can be shifted to your family member even before any untoward incident. However, the nominees should continue to service the client in order to be eligible to get trail commission. No commission can be paid to a non-empanelled entity. Anybody who receives brokerage has to have an ARN number and a valid ARN number which is renewed through proper procedure.
AMFI circular dated January 27, 2004 allows an IFA to appoint a nominee. The nominee is entitled to get trail commission on the business procured by the IFA till his or her death. However, the nominee will not be entitled for any commission on SIP investments.
To answer your second question, if you wish you to discontinue your business, you will be paid trail commission only if you continue renewing your ARN. Trail is paid to serve the customers. There is no way that you will continue to get brokerage if you do not renew your ARN number.
Further, AMFI circular says that the trail commission will be paid on the business procured by the agent prior to the cancellation of ARN provided the ARN registration is not withdrawn by AMFI on account of a penal action by AMFI or payment of commission has been suspended for non-compliance of annual certification requirements or on account of non-renewal of ARN.