SEBI Proposes Changes to Demat and Mutual Fund Nomination Requirements

SEBI Issues Consultation Paper on Modified Nomination Norms

On 17 March, the Securities and Exchange Board of India (SEBI) released a consultation paper on revised norms for nomination in demat accounts and mutual fund folios. The paper seeks public feedback to enhance the ease of investor onboarding and simplify the nomination process.

Background

Last year, on 10 January 2025, SEBI issued a circular outlining revised nomination facilities. The circular allowed single-holding investors to nominate one person (excluding minors) to operate their accounts if they are physically incapacitated but still mentally capable of contracting. However, nominees are not allowed to update key account details, and investors are required to provide personal identifiers of the nominee.

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SEBI Proposals

SEBI has proposed several modifications to the existing nomination rules:

1. Facilitating Nominee Operations: Regulated entities will provide a facility to empower nominees to operate investor accounts or folios in case of incapacitation. However, SEBI acknowledges the challenges in implementing this facility due to high costs and audit trail difficulties.
2. Streamlining Nominee Details: SEBI proposes to make only the nominee's name and relationship mandatory, with remaining details optional for investors to provide.
3. Default Nomination Option: SEBI suggests making nomination the default choice for new accounts, with regulated entities sending reminders to existing account holders to provide a nomination.
4. Maximum Number of Nominees: SEBI proposes increasing the maximum number of nominees from 10 to 4 for demat accounts and mutual fund folios, while maintaining the maximum number of joint holders at 3.

SEBI welcomes public comments on these proposals to enhance the ease of investor onboarding and simplify the nomination process.

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