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PMS distributors can renew their license within 12 months of expiry. However, their commission on existing assets and incremental business will be withheld till the time of renewal, clarified SEBI.
In a communication sent to Association of Portfolio Managers of India (APMI), SEBI said, “Distributors whose eligibility to distribute PMS has expired will not be paid commission till they regain eligibility or 12 months whichever is earlier.”
Further, SEBI clarified that distributors cannot onboard new client during the expired period. Also, SEBI has asked the PMS managers to serve at least 3 reminder notices to such distributors on renewal of their PMS distribution license.
If PMS distributor does not renew his/her license within 12 months, his/her entire commission will be forfeited, clarified the market regulator.
In case of demise of PMS distributor during the expiry period, PMS providers will have to pay accumulated commission to the registered nominee without evaluating any criteria.
However, such a nominee will be required to obtain PMS distribution license if they continue to earn trail income on existing assets and incremental business, said SEBI.
Simply put, nominees cannot get trail commission if they do not appear for examination within 12 months of the date of demise of the distributor. In mutual funds, nominees get trail commission on the assets built before the demise of MFD even if they opt not to become an MFD. If they want commission on incremental business, they are required to obtain ARN within 6 months of the demise of the distributor.
According to the SEBI norms, MFDs will have to clear NISM exam - NISM Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination to sell PMS. Further, NISM has launched eCPE training for PMS distributors.