What is an ARN number in mutual funds?

While dealing with mutual fund investments, investors need to route their investments through accredited channels. The ARN number is a surefire way to ensure you are dealing with trustworthy intermediaries.

What is an ARN number in mutual funds?

The Association of Mutual Funds in India (AMFI) has mandated that all mutual fund distributors in India should have an ARN. The ARN is a unique identification number. It tracks all transactions that individual investors make through a mutual fund distributor. It also records the commission that the distributor earns.

But more importantly, from an investor’s point of view, the ARN can verify the credentials of the mutual fund distributor.

The concept of an ARN number

Now that you have a broad understanding of ARN let’s zoom in on the concept a bit more.

What is an ARN number, and how does it work?

ARN numbers stand for “AMFI Registration Number.” Mutual fund distributors need to have it to conduct their business. The ARN assures investors that the holder has the necessary certification and competence.

For every investment made by an investor through a distributor, the mutual fund pays a commission to the distributor. This is possible only if the distributor has this ARN. The commission is paid out from the investment monies received from the investor.

The importance of ARN numbers in mutual fund investments

1. Since the ARN is a unique number, identification becomes clear.
2. As per regulations set by the Securities and Exchange Board of India (SEBI)—the compliance of which is ensured by the AMFI—all transactions can only be routed through authorized distributors. And the ARN is proof of this authorization. It is also proof of qualification because it is only issued after completing the mandatory National Institute of Securities Markets (NISM) certification.
3. ARN thus helps investors verify the authenticity of the intermediary. This insulates them from fraud and misrepresentation.
4. ARNs help to hold individuals and entities accountable for all transactions. Authorities can use it to take appropriate remedial action in case of misconduct.

How ARN numbers are used in mutual fund investments

ARN numbers are used in mutual funds for the following purposes:

• To identify distributors: Since ARNs are unique numbers, it becomes easy to identify reliable distributors.
• To pay commissions: Distributors earn a commission from mutual fund companies for investments they receive through them. The payment of these commissions also requires the ARN.
• To track investments: Since all mutual fund transactions are recorded and tracked by AMFI, it becomes easy for investors to track their investments even as the regulator monitors the mutual fund distributors.
• To comply with regulations: All distributors must be registered to transact in mutual funds.

How ARN numbers ensure transparency and compliance in the mutual fund industry

ARN is important because it ensures transparency and compliance in the mutual fund space. It can do this because it helps with the following:

1. Distributor identification: It becomes easy to identify distributors through their unique ARNs.
2. Registration process: To get an ARN, the distributor must meet many eligibility criteria and undergo mandatory training and due certification. This ensures that only competent and qualified people handle the distribution of mutual fund offerings.
3. Disclosure of commission: It is mandatory for mutual fund distributors to disclose the commissions earned. Through ARN, investors can track these commissions and check compliance.
4. Protection to investors: Dealing only with accredited distributors with ARN ensures protection from fraud and misrepresentation.

How to get your ARN number

If you’re already set to be an investor, here’s how you get your ARN.

• If you are an intermediary, apply in a prescribed form available online and at the offices of AMFI and CAMS. Intermediaries must submit copies of their NISM certification, Aadhaar Card, PAN Card, bank account proof, and two passport-size photographs.
• Otherwise, you can submit the application form and your Know Your Dealer (KYD) acknowledgment in person. The intermediary fee, including GST, is ₹3,540.

Finding your ARN number

Here are a few quick responses to help you find your ARN.

Where to find your ARN number

If you invest through a mutual fund distributor, your ARN will be in their mutual fund statement.

How to use your ARN number to track your mutual fund investments

1. Click on the “Track your investments” option on the mutual fund website.
2. Enter your ARN number.
3. Furnish the required details as asked for and hit “Submit.”
4. Your current holdings in a mutual fund account will be displayed, along with NAVs, gains/losses made, etc.

This information can also be accessed through the website of the Registrar and Transfer Agent (RTA) appointed by the mutual fund company.

The importance of keeping your ARN number safe and secure

1. Legal issues: If your ARN is compromised and misused by unauthorized persons, you could face legal and compliance issues.
2. Protection of your reputation: Misuse of your ARN could tarnish your reputation in investment circles.
3. Fraud prevention: Keeping your ARN safe can prevent misuse or fraudulent use.
4. Accuracy in records: If you have been careful in protecting your ARN from misuse, your records will be accurate.

Benefits of using ARN numbers

Before we conclude, let’s look at the pros of relying on ARNs.

1. Ease in identification: Investors can identify genuine mutual fund distributors by their ARN.
2. Credibility and professionalism: Possessing an ARN lends an air of professionalism and credibility to mutual fund distributors since they are certified by the AMFI.
3. Timely commission payment: Companies can pay commissions on time when the ARNs are in place.
4. Convenience: Investors can invest conveniently when dealing with certified mutual fund distributors having ARNs.

Limitations of ARN numbers

The cons are as follows:

1. Limited information on distributors: The ARN only offers limited information on mutual fund distributors. For instance, we cannot assess their backgrounds in other respects.
2. Potential for misuse: It did not eliminate the possibility of unauthorized trading and misrepresented selling via someone else’s ARN.
3. Limited coverage: Investors investing in mutual funds through banks and online platforms cannot track their transactions using ARN.
4. No standardization: Since there is no standardization across mutual companies and intermediaries, investors need to track multiple ARNs while investing in schemes.

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