SEBI allows mutual fund investors to name up to 10 nominees

The Securities and Exchange Board of India (SEBI) has announced new nomination rules for mutual funds and demat accounts to reduce unclaimed assets and ensure better management of investments, especially in situations like illness or the passing of an investor.

Key changes in nomination rules

Investors now must provide detailed information about their nominees, including any one of the identification details like PAN number, driving license number, or the last four digits of their Aadhaar number. Contact details and relationship with the investor also need to be specified. Interestingly, investors can nominate up to 10 individuals in a mutual fund account.

SEBI also stated that upon transmission of a joint account or folio, the nominees shall have the option to either continue as joint holders with the other nominees or open individual accounts or folios for their respective portions.

For transmission of assets to the registered nominee following an investor's death, only two documents will be required: a self-attested copy of the death certificate of the deceased investor and the completion, updating or reaffirmation of the nominee's KYC details.

Online and offline nomination options

SEBI has also mandated that regulated entities shall provide investors with the option to submit nomination forms either online or through physical/offline mode. For online nomination, the regulated entities shall validate the nomination through digital signature certificates or Aadhaar-based e-sign.

Regulated entities shall also provide acknowledgement to the investor for every nomination submission, regardless of the mode chosen. Regulated entities must maintain physical or electronic records of nominations and their acknowledgements for eight years after the transmission of the folio or account.

Special provisions for incapacitated investors

For incapacitated investors, any one of the nominees is empowered to operate the investor's folio, specify the percentage or absolute value of assets in the account or folio to be encashed by such nominee and change such mandate any number of times without any restriction.

To ensure transparency, the asset management company (AMC) must conduct an in-person visit to the incapacitated investor, verify their approval with a thumbprint or mark, and have it witnessed independently. Any money withdrawn will only be transferred to the investor's registered bank account, with no changes allowed to contact details or linked accounts.

Recognising the unique challenges faced by incapacitated investors, SEBI has tasked depositories and the Association of Mutual Funds in India (AMFI) with creating a standard operating procedure (SOP).

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