Listen to this article
In an effort to facilitate ease of doing business, AMFI has allowed individual MFDs who want to change their business structure from individual to LLP, partnership firm, private limited etc. to get provisional ARN registration for the new entity for a certain time.
However, MFDs availing this benefit will have to map their EUIN within 6 months to become fully compliant.
This has come after AMFI observed instances of incremental inflows going to direct plans in absence of valid individual ARN during the transition period.
According to the AMFI norms, individual MFDs who want to obtain non-individual ARN will necessarily map at least one EUIN with the ARN of the new entity. While ARN can be obtained from the new entity’s PAN, they usually nominate their own EUIN for mapping against the new entity. Since EUIN cannot be linked to two ARNs simultaneously, they will have to cancel their ARN first.
However, the real problem is that all subsequent purchase and switch transactions go to the direct plan during the transition period.
AMFI said, “The matter was deliberated by AMFI ARN Committee to arrive at a suitable solution whereby individual MFDs who wish to convert their mutual fund distribution business from individual to a corporate model could apply for corporate ARN without having to do EUIN mapping upfront, so that they may continue to operate under their individual ARN till the date of AUM transfer (after completing the process of getting empanelled with various AMCs and transferring the AUM from the individual ARN to the new corporate ARN across all fund houses). Accordingly, based on the committee’s recommendations to address the above issue, which have been duly approved by the Board of AMFI, it has been decided to introduce a concept of “Provisional ARN” in respect of non-individual ARN applicants by allotting ARN “provisionally” pending completion of EUIN within a specified time limit.”
Here is how you can avail provisional ARN for your new entity:
- You need to submit all documents along with supporting documents, applicable ARN registration fees and a letter of understanding that you will map your EUIN within 6 months. You can download the letter format here
- You need to inform all clients about obtaining the provisional ARN via email or letter. You can download the standard format here
- You will have to request clients to write back if they do not agree to this change. If there is no communication from clients, RTAs will consider it as their consent and execute the transfer request
- The newly formed entity will have to empanel with all AMCs with whom you did business
- You may simultaneously request all AMCs to shift folios of all your clients in the regular plan against the new ARN
- The respective AMCs will have to issue in-principal approval for transfer of AUM after 15 days of cooling period
- Once the new entity receives such an approval, you need to apply for mapping of EUIN to the new ARN and apply for cancellation your existing ARN
- After this mapping, the CAMS-AMFI unit will remove the provisional tag and make your ARN fully active
AMFI has clarified that non-individual MFDs can also avail this benefit. It said, “A non-individual entity applying for AMFI registration/ARN may choose to (i) apply for ARN along with the EUIN registration/EUIN mapping request with the ARN application (if it already has an employee holding valid EUIN) or (ii) apply for ARN provisionally and undertake to complete the EUIN mapping subsequently within 6 months from the date of application, if the entity is yet to appoint an employee having valid EUIN. If the applicant chooses to complete the EUIN registration/EUIN mapping upfront, the existing standard process shall be applicable, i.e., the process for grant of Provisional ARN mentioned below shall not be applicable.”
Here is the application form for non-individual MFDs.
These changes came into effect from April 1, 2024.
