What is an ARN number in mutual funds?

ARN (AMFI Registration Number) is a unique ID issued by AMFI to certified mutual fund distributors after passing NISM Series V-A and completing KYD. It must appear on every application form submitted on behalf of investors.

What is KYD for mutual fund distributors?

KYD (Know Your Distributor) is a due diligence process requiring distributors to submit PAN, address proof, and banking details. Without KYD compliance, AMFI suspends commission payments to the distributor.

Why does a Direct Plan have a higher NAV than a Regular Plan?

Direct Plans do not pay distributor commissions, so the expense ratio is lower. More of the returns compound within the Direct Plan daily, resulting in a consistently higher NAV than the Regular Plan of the same scheme.

What is trail commission in mutual fund distribution?

Trail commission is an annual fee paid to distributors as long as investor money stays in the scheme, calculated as a % of AUM. SEBI banned upfront commissions in 2018, making trail the only form of distributor compensation.

Can a mutual fund distributor (ARN holder) give investment advice?

No. An ARN holder can only distribute and explain mutual fund schemes. Providing personalised investment advice requires a separate SEBI Registered Investment Adviser (RIA) registration.

NISM V-A Chapter 6: ARN, Distribution & SEBI Rules 2026

NISM V-A Chapter 6 carries 6 marks on ARN registration, KYD norms & SEBI rules for fund distributors. Covers direct vs regular plans & compliance.

What Is an ARN and Who Needs One?

Chapter 6 carries 6 marks and directly governs what you — as a mutual fund distributor — can and cannot do. Every question in this chapter connects to real compliance obligations you will face once certified.

ARN (AMFI Registration Number)The unique identifier issued by AMFI to certified mutual fund distributors. To obtain an ARN, you must pass the NISM Series V-A exam (or be grandfathered under older norms), complete KYD, and apply on amfiindia.com. The ARN must be quoted on every application form submitted on behalf of investors.

What Is KYD and Why Is It Required?

KYD (Know Your Distributor) is a due diligence process for mutual fund distributors, analogous to KYC for investors. It requires distributors to submit PAN, address proof, ARN, and a cancelled cheque to verify identity and banking details. KYD must be renewed periodically. Without KYD compliance, commission payments are suspended.

What Is the Difference Between Direct and Regular Plans?

This is the single most important concept for investors — and it's a guaranteed exam question.

Regular PlanAn investor buys through a distributor. The fund pays the distributor a trail commission (typically 0.5–1.0% per annum) from the scheme's expense ratio. The investor pays a higher TER as a result.

Direct PlanAn investor buys directly from the AMC or through a SEBI-registered investment adviser (RIA). No distributor commission — the TER is lower by the commission amount. The portfolio is identical to the regular plan. Direct plans always have a higher NAV than regular plans of the same scheme.

0.5–1.5%Typical annual TER difference between Regular and Direct plans — which compounds significantly over 15–20 years

Check the exact TER gap for any fund using BullWiser's fund analyser — and use this data to explain the real cost of regular plans to your future clients.

What Is Trail Commission and How Does It Work?

Trail commission is an ongoing annual fee paid to distributors as long as the investor's money remains in the scheme, calculated as a percentage of AUM. SEBI banned upfront commissions in 2018 — all distributor compensation is now trail-based. This aligns distributor incentives with investor wealth creation.

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Chapter 6 Practice Questions

Q1. Can a mutual fund distributor with ARN provide personalised investment advice to a client?

Answer: No. An ARN holder can distribute mutual funds and explain scheme features but cannot provide personalised investment advice. That requires a separate SEBI RIA (Registered Investment Adviser) registration.

Q2. Which plan — Direct or Regular — will always have a higher NAV for the same scheme?

Answer: Direct Plan. Because no trail commission is deducted, more of the returns compound within the Direct Plan, resulting in a consistently higher NAV over time.

Q3. What happened to upfront commissions for mutual fund distributors in 2018?

Answer: SEBI banned upfront commissions. All distributor compensation is now trail-based (paid as a percentage of AUM annually), aligning distributor incentives with long-term investor wealth.

Practice all distribution and ARN questions — BullWiser NISM Mock Test →

BullWiser is not a SEBI-registered investment adviser. Nothing on this page constitutes investment advice. Full Disclaimer ↗

Continue to Chapter 7: NAV & TER or back to the full NISM V-A guide.