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One of our readers wrote to us with this query:
Dear Cafemutual,
One major pain point of MFDs is complete forfeiture of trail commission on business acquired between the expiry of ARN and the renewal of ARN, if renewal happens post expiry. This is what happened to me. I was not well over the last few months and I could not appear before the expiry date. Now, I came to know that my trail income will be forfeited on business acquired during the expired period. I would like to know how can I claim my forfeited trail income?
The sender requested anonymity
Dear MFD,
Thanks for writing to us.
From October 1, 2022, AMFI has implemented new ARN renewal norms which says that AMCs will forfeit trail commission of distributors if there is a delay in ARN renewal.
This essentially means that if you delay renewing your ARN by say 10 days, your trail commission generated during the 9 days from the expiry will be forfeited.
Also, you need to factor in delay due to cooling off period i.e. difference between the date of CPE/exam and the date of issuance of certification by NISM. CAMS on behalf of AMFI fetches this data from NISM, which usually takes 10-15 working days after the date of CPE/exam.
AMFI norms say, “If the application for ARN renewal is submitted after the expiry of ARN validity, the same will be renewed from the date of receipt of the ARN renewal application in good order, even though the NISM certificate may have been renewed prior to its expiry.”
Remember that business procured during the expired period or invalid ARN period will be shifted to direct plans. This means, SIP business of MFDs will go to direct plan during the expired period.
In fact, in the latest notification, AMFI has urged mutual fund distributors to renew their ARN at least 30 days prior to the expiry date to avoid trail-forfeiture.
On relaxation, AMFI is not considering extending any relaxation on this, confirmed two AMFI ARN committee members.
A member of AMFI ARN committee told Cafemutual that doing business with invalid ARN is similar to traveling in train without ticket or driving a car without license. “Mutual fund distribution is a professional business. You can’t expect a professional to delay ARN renewal, which is integral part of the business. From customer’s perspective, will they be comfortable going to an advocate or a doctor whose license has been suspended? The answer is clear ‘no’?.”
Another ARN committee member said that while they have received requests from MFDs to consider offering relaxation, the market regulator has instructed AMFI to ensure strict compliance with ARN renewal norms.
In any case, you may approach AMFI requesting them to extend relaxation.
