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AMFI has amended the ARN renewal norms for MFDs. In the latest circular, AMFI clarified that they will forfeit trail commission of distributors if they do not renew their ARN within in three months of expiry.
So far, AMCs were allowed to give your clients to other distributors or simply shift their assets in direct plans if a distributor did not renew his ARN within 3 months of expiry of his ARN. Further, if a distributor did not renew his ARN within 6 months of expiry, AMFI could permanently cancel his ARN and would not issue fresh ARN to such distributors again.
However, these rules have been changed now. Now, MFDs can renew their ARN even after 3 months but they are not entitled to claim trail commission on their previous assets.
Here are some key highlights of the new ARN renewal norms:
- ARN will be considered invalid if it is not renewed on or before the expiry date
- MFDs can renew their ARN six months before its expiry
- Business procured during the expired period or invalid ARN period will be shifted to direct plans. This means, SIP business of MFDs will go to direct plan during the expired period
- Trail commission on assets built before expiry will be withheld till three months of the expiry of ARN
- If MFDs renew their ARN within three months of expiry, they are entitled to get trail commission on their previous assets. Please note that the business acquired during the expired period will not generate trail commission for you. For instance: Assume that you get trail commission of Rs.100 per month. Your ARN got expired on Jan 31 and you renewed your ARN on March 31. During this period, your ARN has generated business of Rs.10 per month through SIP business. According to the new rule, you are entitled to get Rs.200 (Rs.100 for two months, which AMFI has withheld). You will not get Rs.20 because this business was generated while your ARN was invalid
- If MFDs renew their ARN after three months of expiry, they will get trail commission only on business acquired after the renewal date. Trail commission built before the expiry will be forfeited completely. Basically, MFDs will have to start afresh
- These changes will into effect from July 01, 2022
