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What has changed in the new nomination guidelines?
SEBI has made a host of amendments in the nomination guidelines. With effect from March 1, 2025, investors can appoint up to 10 nominees.
However, investors have to give a personal identifier of nominees like details of any one document - PAN, driving license or last four digits of Aadhaar. There is no need to submit a copy of such a document.
Also, investors will be required to give other details like mobile number and email IDs, which is not required currently.
Do MFDs need to redo the nomination process of their clients again?
No, currently it is not mandatory to give personal identifiers of nominees in existing mutual fund folios.
However, fund houses will have to give an opportunity to investors to update their nomination with additional details starting from March 1, 2025.
What will be the new transmission process now?
For nominees
Nominees will have to submit a death certificate of the deceased investor. Also, all nominees will have to undergo KYC to claim the money. So, if a client appoints 10 nominees, all of them will have to do their KYC process. However, such a KYC can be done anytime during the lifetime of an investor.
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.
Also, nominees will have the option to either continue as joint holders with other nominees or for each nominee(s) to open a separate single account/folio.
If mutual fund units are pledged for loan, a due discharge from the creditor has to be submitted.
The good news is that fund houses cannot seek any other documentation like affidavits, indemnities, undertaking or notarization of nominees.
For legal heirs
Apart from the above-mentioned documents, legal heirs will have to give additional declaration that they are receiving the assets of deceased MF investors and they will cooperate in transferring assets to other legal heirs.
There is no need to seek any documentation including KYC in case of joint holding.
What if a nominee dies?
If nominees die before investors, the legal heir of the nominee is not entitled to inherit such an asset. It is the right of the legal heir of the investor to make a claim.
In case of multiple nominations where one or more nominees dies, the assets will be distributed pro-rata to the surviving nominees.
For instance, an investor has appointed three nominees – Ram (50%), Mohan (30%) and Radha (20%). Assume that Ram dies then Mohan will get 30% + 30%(30%/50%*50%) = 60% and Radha will get 20%+20% (20%/50%*50%)=40%.
What happens if an investor opts out of nomination?
Just like a physical opt out form requires a declaration to reaffirm their choice, online option will also have such a declaration form or video.
This declaration has to be submitted to AMC or RTA physically with wet signature. Another option is giving a confirmation via video recording by AMCs and RTAs.
What happens if an investor is incapacitated?
Such investors can appoint a nominee to operate investments on their behalf.
Incapacitated investors can authorize their nominees to redeem their investors. However, the limit has to be set by incapacitated investors. Such a mandate can be changed anytime.
AMFI will put in place a standard operating procedure (SOP) to offer convenience to incapacitated investors and create uniformity in dealing with such investors.
