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AMFI has issued uniform guidelines for MFDs to execute transfer of assets from one distributor to another.
With this, MFDs will have to follow a standard process to execute transfer of assets.
According to the new norms, the new distributor will have to empanel with all fund houses with whom the old distributor has a tie up. The old distributor has to get these details from RTAs like CAMS and KFintech and provide it to the new distributor for empanelment.
The next step is to inform your clients in writing via letter or email informing them about the change in ARN and the rationale behind it along with the details of the new distributor. In addition, you will have to highlight that if the clients have any objection to the change in distributor code, they must write to the respective AMC or RTA directly. Such a letter must mention email IDs of the RTA.
You can download the standard format by clicking here.
This common letter can have details of multiple schemes in which the client has invested.
Further, the old distributor needs to submit an AMC wise application for transfer of AUM (download the standard format here) and the respective RTA with a covering letter (download the standard format here).
The transfer application must have the 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. Here is the checklist to execute it:
- A sample of the communication sent to clients
- Proof of dispatch or email logs
- List of the investors to whom the communication has been sent along with their PAN and folio number
- Declaration from the new distributor as per this format
- Application of cancellation of ARN of old MFD. (Not applicable if the old distributors is tying up with a principal distributor as a sub distributor)
RTAs will have to effect changes to ARN within 15 days if they do not receive any objection from clients and send a confirmation to both the old and the new distributor.
Also, the ARN of the old distributor has to be canceled within 2 working days from the receipt of the intimation of confirmation by RTA.
In case a client raises an objection, the assets of such a client cannot be transferred to the new distributor. Instead, RTAs will have to promptly reach out to them requesting them either to nominate another distributor or switch to direct plan. If they do not come back, such assets will be transferred to direct plans. However, investors need to pay capital gains tax arising out of such a transaction if any.
This guidance has come into effect from April 1, 2024.
