MF News Trail commission will be forfeited if ARN is not renewed within 3 months: AMFI

Trail commission will be forfeited if ARN is not renewed within 3 months: AMFI

Business acquired during the expired period will go to direct plans. This means, MFDs could never avail trail commission on lumpsum or SIP business built during expired period.

Nishant Patnaik Apr 8, 2022

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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

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8 Comments

K.K.KAPOOR · 2 years ago `

AMFI IS BENT UPON HARRASSING INDIVIDUAL ARN HOLDERS. I M 80 YRS OLD AND MAY NOT B ABLE TO fulfil the new conditions. I M ATTACHED WITH INDUSTRY SINCE
1979.IF I CANNOT RENEW MY ARN
BECAUSE OF INFIRMTY AND FAIL TO
PROCURE NEW BUSINESS. MY INCOME FROM MUTUAL FUNDS WILL B ZERO. I WISH TO DIE BEFORE FACING THE TRAGIDY.
WHY NOT AMFI SPARES ARN HOLDERS Who R above A PARITICLAR AGE ?

Nagesh · 2 years ago `

There has to be exemptions, for the rule, like due to health issues etc. As some of the MFD's are self employed, and this will be the main source of income. I sincerely think, the rule is a bit harsh.

VAPIWALA S G · 2 years ago `

We are agree for individual ARN holder at individuals Sr level ages will face the consequences of TRIAL FORFEITED in absence of ARN not renewed in 3 months. AMFI modified rules on ARN renewal PROCEDURE must be align with IRDA license procedure where Sr Agent get exempted for REFRESHMENT COURSES & must be exempted fro ARN renewal after 60 years of aged / minimum of 3 terms of ARN renewed.. We urge to CAFE MUTUAL FUND to represent on behalf of all individual MFDs fraternity

MOHIT BHARDWAJ · 2 years ago `

This is a wonderful practise by AMFI to harrass ARN holders. First by direct plans and disclosing the commission's to investors. Another by trail commission splitted into 12 months. They use the forefitted commissions for their entertainment's. The officials here are not knowlegable at all. Thus only harassing.

Pathuri Venkata Subrahmanyam · 2 years ago `

why this rule was implemented I can not understand. what is the fate of the investor? he is buying at a regular rate but is treated as a direct investor. what the existing units will be treated? whether the customer is being shifted to direct due to his advisor's ARN not being renewed, what will be the rate of repurchase he gets?
the very authority of AMFI in this regard is very questionable and to be dealt with legally. for whose benefit this rule was made, is it for AMFI fees on registration and renewals, investors protection, benefitting the AMCs, or charging high rates to investors for distributor wrong (Non renewal)?
It has to be changed forthwith before implementation.
It is high time for AMFI to issue notice beforehand for renewal as it speaks volumes about investors protection? does it not care for the distributors in the same way?

Pathuri Venkata Subrahmanyam · 2 years ago `

In continuation may I add, this rule is biased towards fund houses, and the basic natural law principle of hearing the other side (Audi Altum Partem) is totally ignored. such an unregulated, one-sided power can be vested in any organization? it needs to be challenged in a court of law if not corrected by AMFI. it's just removing the right to live because one has not renewed in time. while the very questing of periodical renewal itself is not necessary, a drastic penalty of ineligibility for renewal commission for nonrenewal is meaningless and arbitrary.

Kurien Mathew · 7 months ago `

Greetings to all. Above instances happened to me too. My AMFI license was to be renewed on or before June 2023, I had paid the exam fees and appeared for the exam and the said license was renewed in June 2023 valid till June 2026. I was not aware that there is a another fees of Rs.885/- to be paid to CAMS for the ARN renewal, they only intimated me to renew the ARN to which I replied and shared them the AMFI result and the validity of the same. But no body had said that I need to pay another fees of Rs.885/- other than your exam fees, so due to ignorance plus an immediate medical care which I had to undergo a surgery I had to attend to my health issues, it was only on 6th of Oct.2023 I came to know from my RM that there is another fees of Rs.885/- to be paid to renew the ARN which I immediately paid and thus the ARN was renewed and valid till June 2026. Now all my commission has been forfeited, is there any organization or SEBI grievance cell to raise this issue, I am also a senior citizen

Kurien Mathew · 7 months ago `

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