One of our readers wrote to us with this query:
I am an individual distributor. In addition, I am the director of my sole proprietorship firm, Nivansh Consultants. I would like to understand if I could change my ARN and transfer assets to the proprietorship firm.
Alisha, Ludhiana
Dear Alisha,
Yes, it is possible to transfer your assets from individual to sole proprietorship firm.
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 proprietorship firm is valid and KYD compliant.
For this, you will have to first surrender your existing ARN and apply for fresh ARN for your new firm. Ensure that you clear the NISM Mutual Fund Distributors Certification Examination. Once you clear this examination, you will be required to submit registration certification of your company, your PAN, address proof and bank details to apply for fresh ARN. In addition, you will have to undergo biometric KYDs twice – individual and corporate.
Also, you will be required to send a demand draft of Rs.3540 in favour of Association of Mutual Funds in India payable at your location and self-declaration form provided by CAMS.
Since this is proprietorship firm, you will have to submit a separate application to obtain fresh EUIN. You can opt to obtain EUIN for yourself or your employee. In both the cases, you will be required to submit PAN, Aadhaar, two passport size colour photos, DD of Rs.1770 in favour of Association of Mutual Funds in India, ARN registration form, KYD form and NISM pass certificate. If EUIN is in your employee’s name, he will have to undergo biometric for KYD.
Once you get ARN of your proprietorship firm, you will have to make a transfer of assets request within six months of cancellation of your previous ARN. AMFI norms say, “Any distributor who has surrendered his valid ARN in order to obtain a fresh ARN/EUIN shall be considered eligible to transfer his assets to the fresh ARN, even if on the date of application for transfer of AUM, the transferor ARN is surrendered or non-valid. Provided that the application for transfer of AUM should be made within a period of six months from the date of cancellation of ARN.”
Meanwhile, you can intimate AMCs through a written communication about transfer of assets to the new ARN. 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 state 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.
On brokerage, the new distributor i.e. proprietorship 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 the old ARN and new ARN.
Note: This guidance is based on existing AMFI norms as on January 24, 2020. These norms are subject to change.
