One of our readers wrote to us with this problem.
I have cancelled my ARN without making assets transfer request to the new ARN. I joined a large distribution firm and was in a process to transfer assets. However, things did not work as plan. I quit the firm and did not submit my request for transfer of assets to the new ARN. By the time, AMFI had cancelled my ARN. Now, I would like to understand what would happen to my assets and clients. Is it possible to retain ARN and get my clients again?
The sender requested anonymity
Dear Advisor,
Since AMFI has cancelled ARN on your request, you can no longer receive any commission from AMCs. You will receive trail commission until the date of cancellation of your ARN.
Since you decided not to transfer your assets to the new ARN, it would be considered as voluntary exit of ARN.
At times, a few distributors voluntarily discontinue their distribution business. However, most of them do not transfer assets or inform their clients that they should approach some other distributors leaving their clients in lurch, observed AMFI.
According to AMFI norms, such distributors will have to inform their clients in writing that they should get a new distributor of their choice.
Ideally, you should also inform AMCs about your exit from distribution business so that they can keep records of investors and change ARN code linked to the folio as and when such investors change distributor. AMFI norms say that you should send a list of your clients along with folio details to the respective AMCs.
Once investors request for a change in ARN, AMCs will have to change ARN code and send a suitable communication to the investors confirming this.
The new distributor would get trail commission only after transfer of valid assets (KYC compliant accounts). Also, such a commission is subject to claw back.
AMFI cautioned that distributors could not use such a transfer to circumvent AMFI guidelines. Typically, if your clients change the ARN code i.e. from your ARN to the new ARN on their own, there will be no trail commission on such a transaction. The trail commission so generated would go to IAP corpus. However, if client change ARN due to voluntary exit of existing distributor, the new distributor is entitled to get trial commission.
Note: We have written this article based on the inputs from operational heads of a few fund houses and R&T agents. This does not tantamount to be an advice of any nature or a recommendation. Please take advice from AMFI for your guidance.
