The Securities and Exchange Board of India (Sebi) on September 27, 2023, announced an extension regarding the deadline for submission of 'choice of nomination' for demat accounts and mutual fund folios. Initially set for December 31, 2023, Sebi extended this deadline to June 30, 2024 "based on representations received from the market participants, for ease of compliance and investor convenience." Sebi aims to streamline the mutual fund investment process and ensure that proceeds will reach legal heirs or designated beneficiaries.
In an earlier circular, Sebi had outlined the process for fulfilling the nomination requirement. Asset Management Companies were directed to offer unit holders the choice to submit either a nomination form or a declaration form for opting out of nomination. Physical forms must carry wet signatures from all unit holders, 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 unit holder's registered email or phone number.
Unit holders can submit their choices using specified forms through fund houses, registrars, or transfer agents. Additionally, modifications to nominations can be made in investment accounts held through online platforms or by contacting the respective fund house.
For Physical Security Holders, Sebi had stipulated that folios for physical securities would be frozen if PAN, nomination, contact details, bank account details, and Specimen signature were not submitted.
Non-compliance with the nomination requirement will result in restrictions on various mutual fund transactions. These include restrictions on redemptions, systematic withdrawal plans (SWP), switches, and systematic transfer plans (STP).
Notable, Sebi has made nomination mandatory for existing mutual fund folios, including jointly held folios.
Asset Management Companies (AMCs) and Registrar and Transfer Agents (RTAs) were urged by Sebi to encourage the unit holders to fulfil the requirement for nomination/ opting out of nomination. They send fortnightly communications through emails and SMS to unit holders who have not yet complied with the nomination requirement