Mumbai: The mutual fund industry is in talks with legal experts to find out a way in which trail commission can be paid to the nominee appointed by a distributor if he/she is not an AMFI registered ARN holder.
Distributors are seeking clarity on whether their legal heir can be entitled to trail commission in the event of their demise in case the nominee is not an ARN holder.
“There are some legal hurdles. People are talking to legal experts. The current regulations do not allow paying trail commission if the nominee is not an ARN holder,” said a person familiar with the development.
In 2003, under the chairmanship of A P Kurian, AMFI had asked all fund houses to offer nomination facility to their distributors. A few AMCs were already offering such a nomination facility.
Distributors are required to provide their nomination details at the time of empanelment with AMCs. Fund houses currently pay trail commission of 50 basis points to 75 basis points on a quarterly or monthly basis.
Through its circular issued on March 29, 2006, AMFI clarified that the nominee would be entitled to receive commission on business procured by distributor till the date of demise of the distributor and hence no commission is payable on additional investments after the demise of the distributor. The circular also clarified that no commission would be paid on SIP investments post the demise of a distributor.
