Based on our last article which says that nominees will have to obtain ARN to transfer AUM of the deceased ARN, we have received many queries on what if a nominee or legal heir decides not to obtain ARN.
Nominees or legal heirs are entitled to get trail commission on assets built before the demise of an ARN holder without obtaining a fresh ARN.
However, if a nominee wants to do fresh business or generate trail income on SIP inflows, he has to obtain the new ARN and transfer assets of deceased distributor.
In an email sent to a few distributors, AMFI said, “The guidelines issued earlier dated March 28, 2013 with regard to payment of trail commission to nominee or legal heir of the deceased distributors have not been changed. A nominee or legal heir need not be an ARN holder to claim and receive the upfront and trail commission. However, for transfer of AUM, the nominee or legal heir of the deceased ARN holder must have a valid ARN in his name. The latest circular provides the detailed procedure to be followed for transfer of AUM of a deceased ARN holder to the ARN of the nominee/legal heir of the deceased.”
With this, if a nominee or legal heir opts not to obtain ARN, he will continue to get trail commission on assets built before the demise of deceased distributor. Also, such nominees will get commissions even if the ARN gets expired at a future date. In such a scenario, nominees continue to receive commissions till the AUM under the ARN becomes nil i.e. till investors remain invested.
On the other hand, if a nominee or legal heir obtains ARN, he can grow business through existing assets, fresh business and SIP inflows. Currently, nominees are allowed to transfer the assets. 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 should not have been 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.
Remember, AMFI gives six months to nominee or legal heir of a deceased mutual fund distributor to obtain ARN.
In both the cases, the nominee or 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.
