Only qualified mutual fund experts and distributor with an Application Reference Number or ARN code can sell mutual funds. Let’s understand the significance of ARN through the following topics.
ARN refers to Application reference number. It is a unique number which is assigned to all the qualified mutual fund distributor or expert for trading in various schemes.
Everyone has heard the line, ‘mutual fund investments are subject to market risk’ in the television advertisement. However, that doesn’t mean one cannot reduce the risk by more diligence. So, an intermediary is obliged to inform and educate the investor about the risks involved. This will safeguard the interests of all the parties involved in the transaction.
SEBI and AMFI take several measures to ensure the safety of investors. One such step includes the mandatory procurement of ARN code for the distributors. For instance, the Association of Mutual Funds in India (AMFI) has mandated all intermediaries involved in selling or marketing of mutual funds to clear a National Institute of Securities Markets (NISM) certification. After clearing the exam, they must register with AMFI to obtain AMFI Registration Number (ARN).
AMFI relies on M/s Computer Age Management Services Pvt. Ltd. (CAMS) for processing the registration and issuing ARN on its behalf.
ARN code is crucial for both the intermediary as well as the investor. ARN number is like an ID of the intermediary. It can be used to track the assets mobilised by the intermediary. You can also use it to calculate the brokerage of the intermediary.
Legally, an intermediary becomes eligible for distributing mutual funds only after they have received the ARN number. On the other hand, AMFI takes care to assure the investor about the credentials of any registered intermediary. They have to adhere to the ethical code set by the AMFI. Investors can leverage ARN by changing the distributor. If a distributor is changed, then the investor is not charged trail commissions resulting in long-term financial benefits to the investor.