AMFI Revises Cooling Off Period to 12 Months for Brokerage Payouts on ARN Code Changes

The Association of Mutual Funds in India (AMFI) has announced a significant update to its best practices guidelines by increasing the brokerage cooling-off period to 12 months. 

This change applies when investors shift their mutual fund assets from one distributor to another and is aimed at safeguarding fair distribution practices across the mutual fund industry.

Revised Guidelines on Brokerage Payout Timelines

As per the updated norms, asset management companies (AMCs) must now observe a 12-month cooling-off period before releasing trail commissions to new mutual fund distributors when an investor changes their ARN (AMFI Registration Number) code. This is a substantial change from the earlier six-month period that was in place.

Rationale Behind the Policy Change

The extension comes in response to concerns raised by several mutual fund distributors (MFDs) regarding the potential misuse of existing rules. Some large distributors, including banking institutions, were reportedly engaging in aggressive and sometimes coercive practices to induce clients to shift assets, thereby gaining unfair access to brokerage commissions.

How the New Cooling Off Period Works

To illustrate the application of the revised rule, AMFI provided an example. Suppose an investor moves their mutual fund distribution from Distributor A to Distributor B on 25 August 2025. Under the new policy, Distributor B will only start receiving trail commissions from 24 August 2026. If, however, the investor reverts to Distributor A within the 12-month window, for instance, on 25 June 2026, the entire cooling-off period will reset. Distributor A will then have to wait until 24 June 2027 to receive any trail commission.

Declaration Requirement for ARN Code Change

Another notable addition is the requirement for a new declaration form. This form must be signed physically by both the investor and the new distributor. AMFI has mandated wet signatures for this process, underlining the importance of verified consent in these transactions.

Strengthened Investor Communication Protocols

To further enhance transparency, AMFI has introduced multiple communication touchpoints during the broker change process. The following steps will now be mandatory:

• Registrar and Transfer Agents (RTAs) will send an SMS to the investor on the next working day after receiving the change request.
• If the investor has not initiated the ARN code change, they are required to inform the respective RTA within 3 days.
• If neither the AMC nor the RTA receives a complaint within 11 days of the SMS alert, the broker change will be processed. An email confirmation will then be sent to the investor, with both the old and new MFDs copied on the communication.

These updated guidelines will come into effect from August 11, 2025. All AMCs and distributors are expected to comply with the revised processes from this date onwards.

Read More: Quant MF Launches India’s First Long-Short Fund Under SEBI’s SIF Category! 

Conclusion 

These new measures are intended to promote better investor protection and discourage unhealthy competition among distributors. While the new rules bring in more checks and balances, they also reinforce the responsibility of all parties involved in maintaining transparency and integrity in mutual fund distribution.

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. 

Mutual Fund Investments are subject to market risks, read all the related documents carefully before investing.