‘MFDs should be mindful of nominating multiple nominees against their ARN’

A nominee of a MFD wrote to us with this query:

My father who was into distribution business died recently. He nominated me and my mother against his ARN. We both have 50% share in his assets. Since my mother is old, I would like to know if I can obtain ARN and continue business on entire assets i.e. 100% assets of my deceased father.

The sender requested anonymity

Dear MFD,

We are sorry to hear about the demise of your father. May his soul rest in peace.

MFDs have to be mindful if they appoint multiple nominees against their ARN. According to the existing ARN transfer norms, all the nominees will have to obtain ARN to continue distribution business of the deceased MFD.

For instance, if an MFD appoints more than one nominee i.e. two in your case, the share of trail commission on assets built before the death of MFDs will be segregated among all nominees (between both) in the proportion given by the MFD. If the MFD has not mentioned any proportion, his assets will be divided equally among nominees i.e. 50% each in your case. 

Ideally, both of you have to appear for NISM examination and obtain new ARN to continue business of your father. Since you are planning to obtain ARN, you may continue distribution business on half of the total assets of your father.

Your mother will continue to get trail commission on the assets built before the demise of MFDs. This means, she will not receive any commission on incremental inflows through SIPs and additional purchases post the death of ARN holder. 

Now coming to procedure, you can transfer AUM of your father to your ARN only if the ARN of deceased distributor is valid on the date of demise and his trail commission is not suspended.

In addition, you must have a valid ARN and have to be KYD compliant as on the date of request of such a transfer. Also, you will have to submit his annual declaration of self-certification (where applicable) due as on the date of request of transfer of AUM.

Here are other key points to remember:

• Only valid assets can be transferred to the legal heir or nominee
• The new distributor has to apply for cancellation of ARN of deceased distributor to CAMS-AMFI unit within 6 months of date of demise. CAMS will send a confirmation to the new distribution on receipt of such requests
• CAMS will have to cancel the ARN and intimate all AMCs and RTAs
• The new distributors will have to individually approach all empanelled AMCs and make an application for transfer of assets to his ARN
• The new distributors will have to intimate all clients of change in ARN through letter or email. He 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
• 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 with PAN and folio numbers
• There will be no need to accept written consent from clients on such transfers
• AMCs will have to effect changes to ARN after cooling period of 15 days. In case of any objection, AMCs can hold such a transfer