Mutual Funds, demat accounts: Sebi announces uniform nomination rules. Details here
The Securities and Exchange Board of India (Sebi) has recently made an announcement regarding the implementation of standardised protocols for nomination facilities and consistent norms pertaining to nominations in demat accounts and mutual fund investments. The primary objective behind Sebi’s initiative is to streamline the asset transfer process to nominees, thereby minimising red tape.
Nominees will now have the authority to manage accounts on behalf of investors who may be unable to do so themselves, with mechanisms in place to uphold the welfare of investors.
Top points
> One notable revision pertains to the maximum number of nominees, which has been revised from three to ten. This alteration provides investors with increased flexibility in appointing multiple beneficiaries.
> Additionally, Sebi has introduced regulations permitting nominees to act on behalf of incapacitated investors, with suitable risk management strategies in position to protect the interests of all stakeholders.
> Nomination is optional for joint demat accounts and mutual fund folios. Confirmation will be required for opting out of singly held accounts. Investors are allowed to change nominees without any restrictions on the number of updates.
> SEBI is focused on streamlining the transmission process to reduce the paperwork burden on nominees. This will streamline and expedite the process for them to inherit assets from deceased investors.
> Furthermore, nominees will now need to provide unique identifiers such as PAN, passport numbers, or Aadhaar for better accuracy and transparency in the nomination process.
> Nominees will serve as trustees for the legal beneficiaries of the deceased individual. It is important to note that the legal beneficiaries of a deceased nominee will not hold any rights to the assets. In the event of any pledges, creditors’ claims will be given precedence over the transfer of assets.
> SEBI has clarified the process for the transmission of Hindu Undivided Family (HUF) accounts, particularly in the event of the Karta’s passing. The principle of survivorship will now apply to joint holdings as per the updated regulations.
> In the previous circular, in cases where a demat account or units of mutual fund schemes are jointly held by two or more individuals, upon the death of one party, the rights, title, and interest will be passed on to the remaining joint holders/owners.