Sebi, in a consultation paper floated on February 2, 2023, proposed making nomination optional for jointly-held mutual fund folios and demat accounts.
The proposals include permission for investors to add a large number of nominees (up to 999) and unrestricted access for additions, changes, and cancellations w.r.t nominees.
Surprisingly, the data in the release said that 14 per cent of single-holder mutual fund folios and 72.48 per cent of Demat accounts (9.8 crore) lack nomination details. Amid a surge in demat account registrations, this news is unsettling.
Sebi monthly bulletin released on January 18, 2024, said the Indian market witnessed a surge in demat accounts, with NSDL adding 4.3 lakh and CDSL adding 37.5 lakh accounts in December 2023.
Sebi has set June 30, 2024, as the deadline for account holders to nominate beneficiaries or formally opt out, warning that non-compliance would lead to account deactivation.
Sebi's proposals include mandatory nominee contact details, and personal identification details, like the name of either parent or government-issued IDs to make it easier for institutions to contact and identify the nominees post the death of the investor. If the nominee is a minor, guardian details may be provided optionally.
KYC completion or updates for nominees during the lifetime of the investor can be made optional, Sebi says. Nominations should be made, changed or cancelled in a safe, secure, verifiable manner; i.e., by use of a digital signature certificate or Aadhaar-based eSign or physical signatures of the investors or through dual authentication11.
If the nomination is done by affixing a thumb impression, the same shall be in the presence of two independent witnesses. In case of two or more nominees, such nominees shall not constitute joint holders/owners unless all such nominees agree to be constituted as joint holders/owners.
Comments from the public should reach SEBI by March 8, 2024, Sebi said.
In a separate consultation paper, an expert committee formed by Sebi proposed abolishing the mandatory 1 per cent security deposit for companies launching public or rights issues.
Currently, this 1 per cent deposit with stock exchanges was returned to the company after the public issue. This reform was put up so that an issuer resolves investor complaints relating to the transaction such as for refund of application money, allotment of securities and dispatch of certificates.
Sebi now suggests eliminating this requirement, citing reforms like ASBA (Application Supported by Blocked Amount) UPI mode of payment, and mandatory allotment in demat among others.
These changes effectively address above mentioned concerns and so a security deposit is not required, Sebi says.