AMFI Eases Trail Commission Rules for Lapsed ARNs

 

The mutual fund distribution ecosystem in India has witnessed a pivotal shift with the Association of Mutual Funds in India (AMFI) revising the commission forfeiture norms linked to the non-renewal of ARN (AMFI Registration Number). This development is particularly significant for Mutual Fund Distributors (MFDS), many of whom have expressed concerns over the rigid forfeiture framework that prevailed until March 2025.

Key Changes Effective for ARN Expiring After April 1, 2025

1. Partial Commission Forfeiture Instead of Full Forfeiture

• Earlier Norm: If ARN was not renewed within 3 months of expiry, the entire trail commission—even for business built before expiry—was forfeited.
• New Norm: Only the commission earned during the non-compliant period (post 3-month grace) will be forfeited.
• Example:
• ARN expiry: March 10, 2025
• Renewed on: August 10, 2025
• Trail commission from March 11 – August 9 will be forfeited.
• Commission on AUM till March 10 will be repaid upon renewal.

2. Clarity on Commission Payable

• If ARN is renewed within 3 months, all withheld commissions are fully released.
• If renewed after 3 months, commissions from the non-compliant period are forfeited, but trail from assets built before expiry will be repaid.

3. Investor Communication Requirement

• AMCs must notify investors in writing if the MFD's ARN has expired and not yet renewed.

 ✅ Implications for MFDs

• Reduced loss of income from trail commissions due to procedural delays in ARN renewal.
• Business continuity and improved distributor retention, especially for small and individual MFDs.
• Reinforces the importance of timely ARN renewal but adds a layer of fairness and flexibility.

Conclusion

AMFI’s decision to relax the commission forfeiture norms for non-renewal of ARNS reflects a pragmatic and inclusive approach to regulatory governance. By ensuring that MFDS retain trail commissions on business procured before ARN expiry—even in cases of delayed renewal, AMFI has addressed a long-standing concern with sensitivity and foresight. These changes will not only improve financial continuity for MFDS but also foster trust and stability across the distribution network. Importantly, the policy retains accountability by maintaining forfeiture for the period of non-compliance, thus reinforcing the importance of timely renewal. As the mutual fund industry continues to grow and deepen its retail reach, such responsive policy shifts are essential for empowering distributors and supporting long-term investor engagement.