Association of Mutual Funds in India (AMFI) has modified certain provisions its best practices circular on transfer of assets from one distributor to another. The full circular can be accessed here.
In the earlier regime, after the change of distributor code, the trail commission for all business done by earlier distributor was payable to new distributor on a prospective basis at the same rate at which commission was paid prior to the transfer of asset. Now, the trail commission will be basis the lower of the commission rate applicable to earlier distributor (transferor) and the new distributor (transferee). Other than this trail, no other incentive will be paid to new distributor due to the transfer of assets.
Another key provision of the revised circular is that distributors need not surrender their AMFI Registration Number (ARNs) if they wish to become sub-broker of another distributor with whom they wish to transfer the assets to service their clients. However, after transferring the assets, the transferor distributors should not canvass business independently under his/her ARN.
Request for change of distributor will be initiated even in cases where the earlier distributor has surrendered his/her ARN to obtain fresh ARN/EUIN. The transfer of assets has to be done within six months from the date of cancellation of ARN.
Further, AMFI has deleted the clause ‘Transfer of assets to the on-line platform of new distributor’ from the revised circular in cases where the ARN code change is initiated by existing distributor.
