The industry body has drastically increased the registration and renewal fees for mutual fund distributors across the board
With the mutual fund (MF) industry bogged down by a number of problems, the decision of the Association of Mutual Funds in India (AMFI) to hike AMFI registration number (ARN) renewal fee is likely to prevent new independent financial advisors (IFAs) from entering the market. However, the move is also expected to curb unscrupulous players from obtaining multiple ARN numbers to dodge income-tax (I-T) authorities. AMFI clearly states that no individual should hold more than one ARN card or certificate of registration.
AMFI, in its circular issued on 19 May 2010, has hiked the ARN registration and renewal fees across the board with effect from 1 June 2010.
The ARN number for corporate bodies will be valid for three years. For individuals and corporate employees, the validity period will be computed from the date of receipt of the application till the date of validity of AMFI/NISM certificate.
Obviously, this move has not gone down well with the distributors who feel that the hike is unjustified.
Some IFAs have already approached AMFI and the market regulator Securities and Exchange Board of India (SEBI) opposing the new fee structure.
According to industry sources, the move is likely to prevent firms from getting multiple ARN numbers. Sources indicate that a leading national distributor has received numerous ARN numbers under the same address.
“If a person has four firms he will apply for multiple ARN numbers under different names. Then he divides the business and to get away from I-T liability. Now it will not be viable for such players,” said a distributor who did not wish to be named.
Currently, individuals and corporate employees are required to pay Rs250 as renewal fees. AMFI has drastically increased it to Rs2,500, which is a hike of 900%. However, an individual seeking a new ARN number will now have to shell out Rs5,000 as registration fees.
For banks, non-banking financial companies (NBFCs), public limited companies and institutional distributors, the renewal fee has been raised from Rs7,500 to Rs2,50,000, a jump of a massive 3,233%. Any new player entering the market belonging to this category will have to cough up Rs5,00,000.
The renewal fees for private limited companies has now been increased from Rs3,750 to Rs25,000 while partnership firms and societies and trusts/HUFs will have to shell out Rs12,500 from the earlier Rs2,500.
“AMFI does not have any other source of revenue. IFAs will be hit by this fee hike. Some AMCs may reimburse the fee to IFAs. Earlier they (AMFI) earned money from examination fees but now it has been taken over by the National Institute of Securities Markets (NISM). So AMFI has to find new revenue sources,” said a top official from a leading fund house.
Individuals who pass the AMFI examination are required to register with the entity in order to garner business.
“I don’t understand the rationale behind it.The cost of doing business is going up,” said Vivek Rege, CFP, VR Wealth Advisors Pvt Ltd.
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