SEBI's new nomination rules for mutual funds & demat accounts | Fusion - WeRIndia

The Securities and Exchange Board of India (SEBI) has introduced significant changes to harmonize the nomination process for mutual funds and demat accounts.

In its board meeting on September 30, SEBI announced that investors can now designate up to 10 nominees for both mutual fund and demat accounts.

This decision is aimed at simplifying asset transmission processes, enhancing flexibility, and ensuring greater convenience for investors.

Under the new rules, nominees will be empowered to act on behalf of investors when necessary, with safeguards in place to protect against misuse.

SEBI has also streamlined the process of transferring assets to nominees, requiring less paperwork and easing the overall procedure.

For joint holders, SEBI is set to implement a simplified transmission process, allowing assets to be transferred with minimal documentation. Nominee identification will be verified using unique identifiers such as PAN, passport number, or Aadhaar.

Nominees will act as trustees for the legal heirs of investors, with the rule of survivorship applicable in joint holdings.

In the event of the death of the Karta in a Hindu Undivided Family, specific rules will govern the operation of accounts.

However, it is important to note that creditors’ claims will take precedence over the transfer of assets to nominees if the assets have been previously pledged.

Additionally, the legal heirs of a deceased nominee will not have any rights over the transmitted assets.

SEBI also clarified that nomination would be optional for joint demat accounts and mutual fund folios.

However, it will remain mandatory for singly held accounts unless investors choose to opt out, subject to due confirmation.

Investors will also have the flexibility to update or change nominees without any restrictions on the number of times a nominee can be modified.

Further, investors will receive detailed information about nominations, and provisions will be in place to allow the designation of guardians for minor nominees.

SEBI has also emphasized the importance of maintaining records and acknowledging nominations to ensure transparency.

In a previous circular, SEBI had simplified compliance for investors by ensuring that demat accounts and mutual fund folios would not be frozen due to non-submission of nomination details.

The regulator encouraged investors to provide their choice of nomination to avoid the accumulation of unclaimed assets in the securities market.

This harmonization of nomination rules is a progressive move aimed at ensuring the seamless transmission of assets and enhancing investor convenience in managing mutual funds and demat accounts.

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