National distributors have requested AMFI ARN Committee has agreed in principle to relax rules relating to transfer of assets to national distributors in order to create a level playing field with ‘online distributors’.
In January 2014, AMFI had allowed distributors to transfer their full or partial assets to ‘online distributors’ such as FundsIndia and iFAST without having to surrender their ARNs. It is learnt that other national distributors have also approached AMFI ARN Committee to extend the same benefit to them.
As of now, distributors are allowed to transfer assets to other distributors (with the exception for online distributors) only if they surrender their ARNs. “Transfer should be of full assets and after the transfer, transferor distributor should cease to exist / function and his ARN code should be surrendered to AMFI for cancellation,” reads AMFI circular dated January 14.
After this relaxation, national distributors questioned the definition of ‘online distributors’. “We also provide platform to our sub-brokers to transact in mutual funds. Since we have been around in this business for a long time, majority of our inflows comes through the offline channel through our sub-brokers. Logically, the exemption should be extended to us also,” said the CEO of a national distribution firm.
“It’s a grey area. We have not been able to enroll existing distributors on our platform. We need clarity on the definition of ‘online distributor’. It needs to be resolved soon,” said the senior official from a national distribution firm.
The new distributor (transferee distributor) is entitled to get trail commission for the assets transferred by a distributor. This helps the transferee distributor (ND) to share a percentage of commission (usually 60%-70%) to the sub-brokers. NDs provide the back end & sales support, scheme recommendations, software, etc. to their sub-brokers for which they retain a portion of commissions.
Transferring assets from one ARN to another has been a vexed issue for distributors. In a genuine case of ARN code change, (not initiated to poach the business of another ARN holder), earlier the new distributor was not entitled to receive trail commission. This was proving to be a loss of business for the acquirer of assets.
With AMFI now allowing the transferee distributor to receive commission in case of transfer of assets, online distributors have already started enrolling IFAs under their platform. “We have transferred about Rs. 140 crore AUM on our platform. We thank AMFI for this decision. A lot of advisors wanted to join our platform but were afraid of losing out their commission. With the new rule they are able to get their commission through us. We provide end-to-end support to IFAs in transferring their assets to our platform,” Chandrasekar of FundsIndia had earlier told Cafemutual.
