Previously, Sebi had prescribed a deadline of September 30, 2023 for all existing individual unitholders to nominate or opt out of nomination for their mutual fund units, failing which the folios would be frozen. However, based on representations from market participants, the freezing of folios will now come into force on January 1, 2024, instead of the previously set deadline of September 30, 2023.
Sebi had directed asset management companies (AMCs) and registrar and transfer agents (RTAs) to ask unitholders to fulfil the requirement for nomination or opt out of nomination. Accordingly, AMCs and RTAs sent out fortnightly communications through emails and SMS to unitholders who are yet to comply with the nomination requirement. These communications guide unitholders on how to nominate or opt out of nomination.
Failure to comply with the nomination requirement will result in restrictions on various mutual fund transactions, including redemptions, systematic withdrawal plans (SWP), switches, and systematic transfer plans (STP).
Sebi has made nomination mandatory for existing mutual fund folios, including those folios that are held jointly.
Sebi had said in its previous circular that AMCs shall provide an option to the unitholder(s) to submit either the nomination form or the declaration form for opting out of nomination in physical or online form in accordance with the choice of the unitholder(s). Physical forms must carry wet signatures from all unitholders, while online forms will be validated using e-Sign facilities or two-factor authentication (2FA), which includes a one-time password (OTP) sent to the unitholder’s registered email or phone number.
Unitholders can submit their choices using specified forms through fund houses, registrars, or transfer agents. Additionally, nominations can be modified in investment accounts held through online platforms or by contacting the respective fund house. Sebi’s decision aims to streamline the mutual fund investment process and ensure that the fund proceeds reach the legal heir or the right beneficiary.