Mutual fund investments are among the most sought-after options because they often generate lucrative returns for investors. However, these funds may be volatile and subject to market risks.
Naturally, the distributor or fund manager needs to be extremely qualified to handle the risks and take measures to mitigate their effects.
By choosing the right fund manager, you can ensure that your corpus is in safe hands.
That said, how do you determine if the fund manager is qualified enough? Don’t worry because the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds of India (AMFI) have put forward various initiatives to protect the interests of investors.
One of them is that the distributor must have an ARN. In this blog, we will explore what is ARN in mutual funds and discover its importance.
What is ARN in Mutual Funds?
ARN is an abbreviation for Application Reference Number, a unique code or number allotted to a qualified mutual fund distributor.
If the mutual fund distributor in question has an ARN, it indicates the intermediary is authentic and, hence, trustworthy.
An ARN allows these mutual fund distributors to trade in different mutual fund schemes and provide their services in the financial market.
In India, the AMFI is responsible for overlooking the allotment of ARN code after carefully evaluating the applicant.
This code is an alphanumeric code that comprises six distinct parts. Below is a sample code, along with its significance.
BB 09 08 24 999999 2
Where:
BB – Alphabetical code
09 – State code
08 – Month
24 – Year
999999 – Six digits system-generated code
2 – Checksum digit
Why is the ARN Code Important?
As we discussed earlier in the blog, mutual funds are subjected to various market risks.
Thus, only credible and authentic experts must deal in this market. This is because a credible expert can ensure that the risk is minimised to the greatest extent.
That’s why SEBI and AMFI introduced the ARN code system. The ARN code is essential from the standpoint of SEBI and AMFI because it only allows distributors with great expertise and ethics to buy and sell in the mutual funds market.
An ARN also helps the authority boards keep track of all the investments and transactions that these mutual funds intermediaries make, thus protecting the interests of the investors while upholding the established standards.
Having an ARN code also indicates that the distributor is governed by the code of conduct of SEBI, and therefore, as an investor, you can be assured that there will be no instances of fraud or scam.
Additionally, the ARN code provides a quick way to establish the legitimacy of the mutual fund distributor and helps you compute the brokerage amount required!
Lastly, an ARN code is only valid for three years.
During the renewal, the applicant must provide a copy that proves that the applicant has passed the National Institute of Securities Markets (NISM) exam.
This is a great way to verify the legitimacy of the mutual fund distributor.
How to Get an ARN Code?
A prerequisite to obtaining an ARN code is the NISM certificate. After procuring the certificate, ensure the documents listed below are all available to ensure a smooth application process.
- Identity proof ( PAN card copy, Aadhar card copy)
- Bank account details ( Passbook, bank account statement)
- Passport size photographs
- Self-attested copy of the NISM certificate
Once all these documents are in place, you can apply for the ARN code online or offline. The steps for both these modes are listed in the sections below.
Offline Mode
- To apply offline, you must visit your nearest Computer Age Management Services (CAMS) office and obtain the application form.
- Fill out all the necessary details in the application form and submit it along with all the relevant documents and paperwork.
- After submitting the form, you should pay the ARN code fees.
- Once the documents have been verified and the process is complete, you will receive a Letter of Registration and Photo ID to your registered address.
Online Mode
To avoid the hassle of physically going to an office, you can follow the steps below to apply online.
- Sign up using the CAMS gateway and obtain the application form from the website.
- After filling out the details, submit the form along with the Know Your Distributor (KYD) and relevant documents.
- The application form can be submitted digitally, while the KYD has to be submitted in person.
- After finishing the above process, pay the required fees for the ARN code.
- After all the paperwork has been verified, you will receive the Letter of Registration and the Photo ID at your registered email address.
Conclusion
To summarize, the ARN code is a prerequisite for mutual fund intermediaries to buy and sell their funds in the market.
An ARN code is one of the most standard ways to help you establish the legitimacy of the mutual fund distributor.
Additionally, due to the ARN code, all the activities carried out by mutual fund distributors are constantly monitored by various authorities, which ensures that you do not fall prey to fraud or scams!
