AMFI has issued best practices circular revising AUM transfer norms for distributors.
The trade body has urged AMCs to implement these norms in letter and spirit. AMFI said, “Members are requested to adopt the revised guidelines with immediate effect, but latest by April 1, 2019. Members are also requested to confirm having noted the contents of this circular for due compliance and also to place this circular before their trustees for information.”
Here are the key highlights of the revised circular
If investor changes distributor or shifts to direct plans: There is no revision in this. Investors can continue to change their distributors and switch to direct plans without obtaining NOC from their existing distributor.
If existing distributor initiates change in distributor: 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 the norm in which distributors are allowed to change ARN if they opt to transfer their assets to the online-platform of a new distributor.
Also, you have to ensure that your ARN is valid and KYD complaint before transferring your 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.
If distributor changes due to voluntary exit of ARN holder: 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.
Hence, such distributors will have to inform their clients in writing that they should get a new distributor of their choice. AMFI has directed such distributors to write to AMFI about their desire to exit MF distribution business. AMCs will have to keep records of such investors and change ARN code linked to the folio as and when such investors change distributor.
Commission: The new distributor would get trail commission only after transfer of valid assets (KYC compliant accounts). AMCs would pay commission to new distributors only after cancellation of old ARN except when old ARN holders opt to become sub-distributor. New distributor will get trail commission on a prospective basis on the valid assets. Trail commission rate would be lower of commission on old ARN and new ARN.
Click here to read the complete circular.
