The Securities and Exchange Board of India (SEBI) on June 10, 2024, announced that demat accounts and mutual fund folios of existing investors will not be frozen despite a lack of nomination details for these folios. Investors may continue investment without facing the inconvenience of having their accounts locked due to missing nominee details.
Sebi's latest circular says, "Non-submission of ‘choice of nomination’ shall not result in the freezing of demat accounts as well as MF folios." Earlier Sebi had extended the last date for submission of ‘choice of nomination’ for Demat accounts and mutual fund folios to June 30, 2024, and said that noncompliance would lead to frozen folios.
However, all new investors must compulsorily either nominate or opt out of nominating anyone in their demat accounts and MF folios. Sebi feels that such nominations can help avoid any future complications such as delay in the transfer of assets to legal heirs.
Other Key Amendments
The investors now need to fill in three mandatory fields for updating nomination details. Investors can add up to three nominees. These three requirements include the name of the nominee, the share of each nominee, and the relationship with the applicant.
The non-mandatory details include the address of the nominee, contact details, email ID, and identification details of the nominee.
Revoking its earlier mandate Sebi said that security holders holding securities in physical form will now be eligible for receipt of any payment including dividend, interest or redemption payment even if 'choice of nomination' is not submitted by them. Further Sebi allows them to lodge grievances or avail any service request from the RTA, despite a lack of nomination details for these folks. Earlier Sebi had taken away these rights from investors if nomination details were absent in folios.
"Payments including dividend, interest or redemption payment withheld presently by the Listed Companies or RTAs, only for want of ‘choice of nomination’ shall be processed accordingly," Sebi said.
Sebi asked AMCs and RTAs to encourage the demat account holders and mutual fund unit holders to update ‘choice of nomination’ by sending a fortnightly email or SMS that contains guidance on how to provide ‘choice of nomination’. Further, a pop-up shall be provided on the web or mobile application by depositories and depository participants while logging into the demat account and by AMCs to encourage investors to opt for nomination.
