One of readers wrote to us with these queries.
Hi Team Cafemutual,
I floated a limited liability partnership (LLP) some three years back. I also have an active ARN number in my name. Can I transfer my assets to LLP from individual ARN? Please guide me with following queries:
1. If yes, please provide step-by-step process to transfer AUM from individual ARN to LLP ARN
2. Things to keep in mind before transferring assets
3. How would this merging impact brokerage rates
4. What if something goes wrong; where and how to approach
5. Will I need to inform different stakeholders like execution platforms, AMCs and RTAs?
Thanks
Harshad Doshi, Mumbai
Dear Harshad,
Yes, it is possible to transfer your assets from individual to an LLP.
AMFI norms say that distributors can initiate change in ARN if they change their name or legal status such as proprietorship, LLP, private limited and so on.
However, before transferring your assets, you will have to ensure that your new ARN i.e. ARN of your LLP is valid and KYD compliant. Since you already have business in your LLP’s ARN, it would not be a problem.
However, we strongly recommend to ensure that you complete KYC details of all your clients, link PAN and Aadhaar with their folios and submit annual self-declaration if it is pending.
Now, coming back to transfer of assets, you will have to first surrender your individual ARN and make a transfer request within six months of cancellation of the existing ARN.
The next step is to inform your clients in writing via letter or email informing them about the change in ARN and the rationale behind it along with the details of new distributor i.e. your LLP. In addition, you will have to highlight that if the clients have any objection for the change in distributor code, they must write to the respective AMCs directly. AMCs will have to effect changes to ARN within 15 days if they do not receive any objection from clients.
In case a client raises objection, distributor should immediately inform the AMC.
The transfer application must have reason for transfer supported by evidence and certification that letters/emails have been sent to all existing clients intimating them of change of distributor. You will have to attach a sample of such communication along with a list of clients.
If anything goes wrong, you can reach out to CAMS Distributor Help Desk through point of sale centres.
The new distributor i.e. your company would get trail commission only after transfer of valid assets (KYC compliant accounts). AMCs would pay commission to new distributors only after cancellation of old ARN.
On brokerage, trail commission rate for the new distributor will be in line with the trail commission rate of old distributor.
Now, coming to the last part, since you will make transfer request to CAMS, it will be automatically updated with CAMS serviced fund houses.
However, you will have to write to KFinTech and execution platforms like BSE Star MF, MFU and NSE NMF II informing them about such a transfer. Remember to become a member of an execution partner before making such a request.
Note: This guidance is based on existing AMFI norms as on December 2021. These norms are subject to change.
