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To reduce unclaimed amount, SEBI has issued a new consultation paper to revise and revamp the existing nomination facilties in the Indian securities markets including mutual funds.
However, the new guidelines will not impact existing guidelines on rule of survivorship (for joint holding), when a person dies leaving a will or when a person dies intestate i.e. without leaving a will.
Interestingly, SEBI data reveals 8% of MF accounts under single holding are without nomination opt in or opt out. This number was 27% in joint MF holding.
Here are some points that need deliberation:
- In joint accounts, the survivor holder should continue to be allowed to change or cancel nomination made previously after demise of one of the unit holders
- If all joint holders pass away, the units should be transferred to the nominee. In case of HUF, the new karta will be entitled to get such units
- In single holder, the nominees will be entitled to get MF units
- Death of nominee when investor is alive does not entitle nominee’s legal heir to any right
- If one or more nominees are specified and the proportion of distribution is not available, the fund house may divide MF units equally among all nominees
- While nomination will remain optional, in single holding, investors have to specify that they do not desire to make nomination
- Nomination cans be made, change or cancelled online through digital signature or Aadhaar based esign or physical signature. In case investor uses thumb impression, it has to be done in presence of two independent witnesses
- Investors should submit government id proof, contact details of the nominee like physical address, email id and mobile number. This will help reduce the instances of unclaimed amount. However, completion of KYC of the nominees during the lifetime of the investors will be optional
- Nominations can be updated any number of times
- Investors should specify which nominee will be authorised to conduct transaction in case of multiple nominations
- For transmission, nominees will have to complete KYC
- Currently, online transaction and updating of nomination are allowed in joint MF folios. Hence, folios with joint holders should be allowed to do online transaction and update nomination online
- Capturing the relationship of the nominee with unit holder should be optional
SEBI has invited views of AMCs, registrar and other market participants by March 08, 2024. Click here to submit your feedback.
