Nominee or legal heir of a deceased MFD will have to obtain ARN within six months to continue to get trail income, confirmed two members of AMFI ARN committee.
Simply put, AMFI gives six months to nominee or legal heir of a deceased mutual fund distributor to obtain ARN to get trail commission. If a nominee or legal heir decides not to obtain ARN, AMCs will transfer the assets of deceased ARN holder to other distributors or direct plans.
There was a confusion among industry players about what happens if a nominee or legal heir decides not to obtain ARN. Before August 1, 2020, nominee or legal heir of deceased MFDs used to receive trail commission on assets built before death of an ARN holder for lifetime.
Now, let us look at how to transfer AUM due to death of a distributor.
In order to transfer AUM of a deceased MF distributor to the ARN of nominee or legal heir, the ARN of deceased distributor has to be valid on the date of demise and his trail commission not suspended.
In addition, the nominee or legal heir must have a valid ARN and be KYD compliant as on the date of request of such a transfer. The new distributor will have to submit his annual declaration of self-certification (where applicable) due as on the date of request of transfer of AUM.
Here are other key points to remember
- Only valid assets can be transferred to the legal heir or nominee
- The new distributor has to submit an application for cancellation of ARN of deceased distributor to CAMS-AMFI unit within 6 months of date of demise. CAMS will send a confirmation to the new distribution on receipt of such requests
- CAMS will have to cancel the ARN and intimate all AMCs and RTAs
- The new distributors will have to individually approach all empaneled AMCs and make an application for transfer of assets to his ARN
- The new distributors will have to intimate all clients of change in ARN through letter or email. He will have to highlight that if the clients have any objection for the change in distributor code, they must write to the respective AMCs directly
- The transfer application must have reason for transfer supported by evidence and certification that letters/emails have been sent to all existing clients intimating them of change of distributor. You will have to attach a sample of such communication along with a list of clients with PAN and folio numbers
- There will be no need to accept written consent from clients on such transfers
- AMCs will have to effect changes to ARN after cooling period of 15 days. In case of any objection, AMCs can hold such a transfer
