Switching your mutual fund distributor: what AMFI's Oct 2025 best-practice circular 106/A changes on AUM transfer
AMFI Best Practice Circular 106A dated 17 October 2025 lets a distributor run their own ARN and act as a sub-distributor at once, and ties trail commission to a 12-month cooling-off.
On 17 October 2025 the Association of Mutual Funds in India (AMFI) issued Best Practices Guidelines Circular No. 106A/2025-26 (reference 135/BP/106A/2025-26), quietly rewriting two long-standing rules on what happens to your assets under management (AUM) when a mutual fund distributor's ARN code changes. Signed by Dy Chief Executive S L Pandian, the circular is a partial modification of AMFI's earlier Best Practice Circular No. 135/BP/106/2022-23 dated 21 March 2023, and it takes effect immediately for all AMFI members.
The change matters to any investor who has ever considered moving their folio from one adviser or platform to another, and to every distributor weighing whether to join a larger firm as a sub-distributor. This explainer sets out exactly what the 17 October 2025 circular deletes, what survives unchanged, and how the twelve-month trail-commission cooling-off period notified on 30 July 2025 fits into the picture. For the mechanics of what the term itself covers, see our glossary entry on AUM.
Market Snapshot
The "market" moving here is not the Nifty or the Sensex but the plumbing beneath every regular-plan mutual fund folio in India: the ARN-linked distribution channel through which trail commissions flow. Circular No. 106A/2025-26 deletes two specific sentences from Annexure A of the 21 March 2023 circular, and leaves everything else in that document intact, per its closing line that "all other provisions remain unchanged".
The first deletion concerns distributor independence. Until 17 October 2025, a distributor who transferred the AUM under their ARN to another MFD's ARN, and thereby became a sub-distributor, was barred from doing any business independently under their own ARN. The second deletion concerns trail commission on investor-initiated ARN changes, aligning the 2023 circular with the newer 30 July 2025 guidance. The table below captures both edits precisely as worded in the 17 October 2025 circular.
| Provision in 2023 circular | Status after 106A (17 Oct 2025) | Effect |
|---|---|---|
| Point 2 B ii, Annexure A: transferor distributor "shall not do any business independently under his/her ARN" after transferring assets; AMC to conduct periodic checks | Deleted | Distributor may now run own ARN and act as sub-distributor simultaneously |
| Point 1, Annexure A: on investor-initiated ARN change, trail commission on transferred assets "should not be paid to the new distributor" | Deleted | Superseded by the 30 July 2025 cooling-off rule |
Neither deletion touches the investor's units, NAV, or expense ratio; the change is confined to how AMFI members administer commissions and ARN records, as set out on the regulator's own site at amfiindia.com.
What Moved Yesterday
The substantive shift is the removal of the "one-or-the-other" restriction that had governed distributor consolidation since 21 March 2023. Under the old regime, once an MFD transferred their book and became a sub-distributor of a principal MFD, they could not conduct independent business under their own ARN; the rationale, stated in the circular, was that the distributor had "taken a conscious decision to work as a sub-distributor". To resume independent business, the entire AUM of the sub-distributor had to be transferred back out, and both the sub-distributor and the principal MFD had to certify to the AMC that the whole book was moving.
AMFI records that it had been "receiving requests from MFDs to review and relax" this provision, so that they could operate independently under their own ARN as well as a sub-distributor of another MFD, without re-transferring the AUM. The matter was examined by the AMFI Standing Committee on Certified Distributors (the ARN Committee), which found merit in the relaxation, and the waiver was approved by the Board of AMFI before the 17 October 2025 circular was issued. In practical terms, the sentence requiring periodic AMC checks and non-compliance reporting to AMFI now "stands deleted".
The second moving part is trail commission on investor-driven switches. Point 1 of Annexure A previously blocked payment of trail commission on transferred assets to the new distributor. That block is now removed and replaced by the framework in AMFI Best Practice Circular No. 135/BP/112-a/2025-26 dated 30 July 2025, itself a partial modification of Circular No. 135/BP/112/2024-25 dated 5 March 2024. The chain of circulars matters, because each one narrows or relaxes a specific clause rather than replacing the whole rulebook.
| Circular | Date | What it did |
|---|---|---|
| 135/BP/106/2022-23 | 21 Mar 2023 | Original guidelines on AUM transfer between distributors |
| 135/BP/112/2024-25 | 5 Mar 2024 | Rules on investor-initiated distributor (ARN code) change |
| 135/BP/112-a/2025-26 | 30 Jul 2025 | Introduced 12-month cooling-off for trail commission to new distributor |
| 135/BP/106A/2025-26 | 17 Oct 2025 | Deleted independence bar and old trail-commission clause |
Under the 30 July 2025 circular now cross-referenced by 106A, an AMC "may consider making payment of trail commission to the new distributor after a cooling off period of twelve months from the change of distributor code in the Unitholder database", subject to the conditions stipulated therein. Twelve months is therefore the number every investor and distributor should hold in mind before assuming a switch redirects trail income immediately.
What to Watch Today
For investors, the headline is reassurance: nothing in the 17 October 2025 circular changes the value, units, or returns of your holdings. If you are running a systematic investment plan, the instalments continue exactly as scheduled; a distributor's ARN status is an administrative layer above your folio, not a lever on your corpus. You can still model your own outcomes independently of any distributor using our SIP calculator, lumpsum calculator and step-up SIP calculator.
What is genuinely worth watching is the twelve-month trail-commission clock introduced on 30 July 2025. Because the new distributor may only start receiving trail commission after a cooling-off period of twelve months from the ARN-code change in the unitholder database, a distributor courting your business has a weaker short-term incentive to solicit a switch than before the 2025-26 changes. That is a structural nudge towards genuine service migration rather than churn, and it is the single most consumer-relevant figure in the entire 106A package.
For distributors, the operational item is the removal, effective 17 October 2025, of the requirement to choose between an independent ARN and sub-distributor status. A distributor can now retain a personal book under their own ARN while simultaneously operating as a sub-distributor of a principal MFD, without the earlier obligation to re-transfer the entire AUM and file dual certifications with the AMC. AMCs, in turn, no longer have to run the periodic compliance checks that point 2 B ii mandated until 21 March 2023's language was deleted.
One caution: AMFI best-practice circulars bind AMFI members and their distribution arrangements; they do not alter your rights as a unitholder under SEBI's mutual fund regulations, which continue to sit above the AMFI framework at the market regulator. Investors should read commission mechanics separately from portfolio decisions, and keep sight of costs such as the expense ratio, which affect returns regardless of which ARN holds the folio.
FAQ
Does AMFI circular 106A dated 17 October 2025 reduce or change my mutual fund returns?
No. The circular, issued on 17 October 2025 as a partial modification of the 21 March 2023 guidelines, only edits how AMFI members handle distributor ARN records and trail commissions. Your units, NAV and expense ratio are untouched; the closing line confirms "all other provisions remain unchanged".
Can a mutual fund distributor now work under their own ARN and as a sub-distributor at the same time?
Yes. Effective 17 October 2025, the sentence under point 2 B ii of Annexure A barring a transferor distributor from independent business under their own ARN "stands deleted", so a distributor may run their own ARN and act as a sub-distributor of another MFD simultaneously, without re-transferring the AUM.
What was the old rule before 106A on resuming independent business?
Before 17 October 2025, a sub-distributor wishing to resume business under their own ARN had to transfer out their entire AUM, and both the sub-distributor and the principal MFD had to certify to the AMC that the whole book was being transferred. That certification-and-transfer condition is the burden the 106A waiver removes.
When will a new distributor receive trail commission after I switch my ARN code?
Under AMFI Circular No. 135/BP/112-a/2025-26 dated 30 July 2025, which 106A cross-references, an AMC may pay trail commission to the new distributor only after a cooling-off period of twelve months from the change of distributor code in the unitholder database, subject to the stated conditions.
Which earlier circulars does 106A modify or reference?
It is a partial modification of Circular No. 135/BP/106/2022-23 dated 21 March 2023, and it cross-references Circular No. 135/BP/112-a/2025-26 dated 30 July 2025, which itself modified Circular No. 135/BP/112/2024-25 dated 5 March 2024.
Do I need to do anything as an investor because of this circular?
No action is required. The 17 October 2025 circular is addressed to AMFI members, not investors, and does not require you to re-submit any folio paperwork. You can continue your SIP or lumpsum investments and, if you wish, review your plan using our lumpsum calculator.
Who signed and approved the 106A circular?
The circular was signed by S L Pandian, Dy Chief Executive of AMFI, and the underlying relaxation was recommended by the AMFI Standing Committee on Certified Distributors (the ARN Committee) and approved by the Board of AMFI, per the text dated 17 October 2025.