Nomination: SEBI Approves Investor-Friendly and Uniform Norms

Moneylife Digital Team 04 October 2024

Investor Interest

In a significant move aimed at simplifying asset transmission and boosting investor convenience, the Securities and Exchange Board of India (SEBI) has approved several amendments to its regulations governing nomination facilities in the Indian securities market. The new norms, which were announced during SEBI’s board meeting on 30 September 2024, will apply across mutual fund investments and demat accounts, ensuring a uniform approach to handling nominations.

One of the key amendments is the increase in the maximum number of nominees, which rises from three to ten. This change offers investors greater flexibility in selecting multiple beneficiaries. SEBI has also introduced provisions allowing nominees to act on behalf of incapacitated investors, with appropriate risk mitigation measures in place to safeguard the interests of all parties involved.

Another critical development is the simplification of the transmission process. SEBI aims to reduce the documentation burden for nominees, making it easier and faster for them to claim the assets of deceased investors. Unique identifiers, such as PAN, passport numbers or Aadhaar, will be mandatory for nominees, ensuring enhanced accuracy and transparency in the nomination process.

The board also approved a consistent set of norms to be applied uniformly across demat accounts and mutual fund folios. These norms include the following:

• Nominees who receive assets will serve as trustees for the legal heirs of the investor, ensuring the responsible management of assets after the investor's passing.

• The rule of survivorship will apply to joint holdings, clearly outlining how assets should be distributed among surviving joint holders.

• Specific guidelines would be introduced for handling accounts in the event of the death of the Karta in a Hindu Undivided Family (HUF).

Nomination will remain optional for joint demat accounts and mutual fund folios, while opting out for singly held accounts will require confirmation from the investor to ensure clarity regarding their intentions. There will also be no limit on the number of times a nominee can be changed, providing investors with the flexibility to update their nominations as needed over time.

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