AMFI Relaxes Commission Forfeiture Norms on ARN Non-Renewal

ARN, or AMFI Registration Number, is a unique code assigned to mutual fund distributors by the Association of Mutual Funds in India (AMFI). It serves as a regulatory certification allowing individuals or entities to distribute mutual fund schemes. In return, distributors earn a trail commission—an ongoing fee paid by asset management companies (AMCs) based on the value of assets sourced through them.

Previously, if a distributor failed to renew their ARN within three months of its expiry, they forfeited the entire trail commission, even on assets built during the valid period of the ARN.

Read More: ARN Code: Application Reference Number in Mutual Funds! 

What Has Changed: Key Highlights of the Relaxation

Effective for ARNs expiring after April 1, 2025, AMFI has introduced a more flexible approach:

• Partial Forfeiture: Instead of losing the entire trail commission, AMCs will now forfeit commissions only for the non-compliant period—i.e., the time between ARN expiry and its eventual renewal (beyond the 3-month grace period).
• Reinstatement of Past Commissions: Distributors will continue to receive trail commissions on assets sourced before the ARN expiry date. The withheld amount during the non-compliant period will be forfeited, but past commissions will be repaid upon renewal.

A Practical Illustration

Consider a distributor whose ARN expires on March 10, 2025 and is renewed on August 10, 2025, after the three-month grace period.

• Under the old rule: All commissions, even for business conducted before March 10, would be forfeited.
• Under the new rule: Only commissions accrued from March 11 to August 9 (the non-compliant period) will be forfeited. Commissions on assets built up to March 10 will still be paid.

Norms That Still Apply

AMFI clarified that while the forfeiture policy has been relaxed, other existing norms remain unchanged:

• Renewal within 3 months: If ARN is renewed within the grace period, all withheld commissions from the date of expiry to renewal will be released.
• Renewal after 3 months: Commissions accrued during the non-renewed period will be forfeited, but those from prior valid activity will be restored.
• Client Communication: AMCs are still required to inform clients when an MFD's ARN has expired and not been renewed. This communication must be in writing.

Conclusion

This relaxation, approved by the AMFI Standing Committee on Certified Distributors (ARN Committee), seeks to:

• Prevent total loss of income for distributors due to delayed renewals
• Support business continuity and morale among mutual fund distributors (MFDs)
• Reduce unnecessary hardship caused by administrative delays

The change reflects AMFI’s responsiveness to ground realities, offering a more equitable structure while maintaining regulatory integrity.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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