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SEBI has issued new guidelines on nomination in which it has allowed security market investors including mutual funds to appoint up to 10 nominees in their demat account and MF folios.
However, the market regulator makes opting out of nomination cumbersome for investors.
Investors opting out of nomination through online route will have to simply enter OTP. However, such an investor will now have to submit a declaration form to exercise opt out nomination in physical mode with their wet signature and submit it to RTAs or AMC office physically.
Another option is confirming that the investor is opting out through a video recording done by AMCs.
Here are other key developments in the nomination process:
- Nomination is mandatory for single holding folios
- There is no need to appoint nominees in joint holding. The surviving holder or holders will be considered as the owner of assets
- Surviving joint holders will be entitled to change or cancel previous nominations
- If all joint holders pass away, the MF units will have transferred to registered nominee. In absence of such a nomination, the assets will be transferred to legal heir of the youngest joint holders or as per Will
- If a Karta in HUF dies, the transmission can happen based on a dissolution deed
- Nominees will receive MF units as trustees
- If nominees die before investors, the legal heir of the nominee is not entitled to inherit such an asset
- Investors can make nomination online by digital signature, Aadhaar based OTP or two factor authentication
- If an investor make nomination physically, the AMCs will have to verify signature. If such an investor gives thumb impression, then it has to be authenticated by at least two witnesses
- There will be no limit on changing nominations by investors
- AMCs will have to share details of nominees and confirm whether it is made by the investors or not in periodic account statements
- While investors will have to mention the proportionate share of holding in case of multiple nominees, if it is not mentioned then AMCs can divide it equally among nominees
- There is no need to complete KYC of nominees during the lifetime of investors
- In case of death of an investor, nominees will have to undergo KYC process to claim assets. In absence of KYC of one or a few nominees in case of multiple nominations, fund houses will transfer assets to nominees with KYC and keep the remaining portion in the MF folios till other nominees complete their KYC
- Investors appointing nominees will have to mention personal identifiers like their PAN, driving license and last 4 digit of Aadhaar of the nominees
- Power of Attorney of an investor cannot appoint a nominee
- In case of incapacitated investors, AMCs can allow nominees excluding minors to operate the investor’s folio. Such investors can mention how much absolute value of assets that nominee can redeem on their behalf
- However, AMCs will have to send an officer to visit the incapacitated investor and request for medical certificate to check the reason for inability to affix signature
- AMFI will have to issue standard operating procedure to deal with incapacitated investor
- If assets are transferred to legal heirs, they will have to give a declaration that he/she/they will co-operate for transmission of assets to other legal heirs either suo moto or when approached
These changes will into effect from March 1, 2025.
