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MFDs should be mindful of keeping their ARN active all the time.
Acting tough against non-compliant ARNs, AMFI has clarified that transactions received under ‘invalid ARN’ will go to direct plans.
The trade body has directed RTAs and AMCs to check the validity of ARN at the time of execution of transactions.
AMF also revised the definition of invalid ARN. According to AMFI, an ARN will be considered invalid when:
- ARN validity period has expired
- ARN is cancelled /terminated
- ARN is suspended
- ARN Holder is deceased
- Nomenclature change, as required pursuant to IA Regulations, not complied by the MFD
- MFD is debarred by SEBI
- ARN is not present in AMFI ARN database
- ARN is not empanelled with an AMC
AMFI clarified that if EUIN is missing or invalid, the transactions can be processed under a regular plan. However, MFDs will have to quote valid EUIN within 30 days. Also, the commission will be withheld till the remediation of EUIN.
ARN under SIPs/STPs transaction will be validated at the time of registration and if it is valid, all subsequent transactions will go to regular plan till the validity of SIP.
Further, SIP registered under deceased ARN will continue in regular plans till the end of SIP tenure.
However, the current norms will not affect mutual funds in demat holding. If an AMC/RTA receives transaction requests with invalid ARN in demat format, such a transaction will be rejected and will not go to direct plans.
AMFI said that such a settlement of units will fail at clearing corporation due to mismatch. “If the RTA processes the transaction in direct plan, the AMC will face issues with corporate action wherein the clearing corporation will not be able to reconcile and credit the units. The distributor/broker will not be able to download the reverse feed/mail back report for the transactions reported by the respective distributor in case if we process under direct plan,” said AMFI.
Also, dividend reinvestment options are excluded from this validation process.
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