One of our readers sent us the following query.
I have two ARNs within my family. I would like to merge the business in a single ARN now. Will it lead to brokerage loss for me? What is the correct procedure to transfer AUM without loss of brokerage?
Abhishek Chandram, R G Wealth Management
Dear Abhishek,
Distributors can initiate change in ARN if they change their name or legal status such as LLP, private limited and so on, merger or acquisition, transferring AUM within family and transferring entire business as a part of succession planning.
However, AMFI has done away with partial transfer of assets. Transfer of AUM is allowed only if you transfer your entire assets to the new distributor.
Also, you have to ensure that your ARN is valid and KYD complaint before transferring your assets. The same holds true for the new distributor who receives such assets.
Once you transfer your assets, you will have to surrender your ARN to AMFI for cancellation. You will have to submit your original ARN within 15 days of such a transfer. However, if you continue to work as a sub-distributor with the distributor to whom you transferred your assets to service clients, you are not required to surrender your ARN. Also, you cannot do fresh business independently under your ARN after transferring assets.
Procedure to change ARN
You will have to intimate AMCs through a written communication about transfer of assets to the new ARN within family. Such a letter should contain the reason for transfer supported by documentary evidence, a specimen copy of the letter of intimation regarding the change of distributors sent to the clients and certification that the letter is sent to all existing clients along with a list of existing clients.
Similarly, a letter sent to your clients should comprise the reason for the change in ARN along with the details of new ARN code. You will have to explicitly mention that if clients have any objection, they can reach out to the respective AMCs directly.
AMCs will have to honour such a request within 15 days from the date of the distributor’s letter unless they hear objection from clients.
Once AMCs complete the transfer of assets, you are required to submit a letter to AMFI for cancellation of ARN along with original ARN card, certificate and letter of registration within 15 days of completion of transfer of AUM. Also, you are required to furnish a copy of letter that you have sent to AMCs requesting transfer your assets to the new ARN.
Brokerage
On brokerage, the new distributor will receive the trail commission. There will be no loss of brokerage. The new distributor will get trail commission on a prospective basis on valid assets. The trail commission rate would be the lower of commission on old ARN and new ARN.
Remember, if your clients change the ARN code i.e. from your ARN to another ARN on their own, there will be no trail commission on such a transaction.
