The Securities and Exchange Board of India (SEBI) recently introduced new regulations regarding the nomination process for Demat accounts and mutual funds. These rules simplify and streamline the process while enhancing transparency for investors and their legal heirs. In this blog, we will learn SEBI’s new rules for nominations in Demat accounts as well as mutual funds.
1. Number of nominees
Now, Demat account holders can name up to 10 nominees, as opposed to the previous limit of 3.
2. KYC of nominees
It is mandatory to submit your nominees' verification documents. The identifiers could include a PAN card, Aadhaar card, or passport number.
3. Power of nominees
Nominees can now act on behalf of incapacitated account holders.
4. Rule of survivorship
In case of joint account holders, the survivor can become the owner.
To comply with SEBI's new nomination guidelines for Demat accounts, follow these steps:
Step 1. Log in to your investment platform: Most brokers and DPs provide a user-friendly online platform to submit nominations or opt-out forms.
Step 2. Select Nomination Option: Choose whether you want to nominate someone or opt out of the nomination process.
Step 3. Submit Details: If you choose to nominate, provide the full details of the nominee(s), including the name, relationship, and percentage of the assets allocated to each nominee.
Step 4. Confirmation: Submit the form electronically or physically, and you will receive a confirmation from your broker or DP.
For your mutual fund investment, you can update your nominations through the following steps:
1. Visit AMC or Registrar Website: Go to the mutual fund company's website or visit the Registrar and Transfer Agent (RTA) platform.
2. Choose Nomination: Select the nomination or opt-out option.
3. Fill in Details: Provide complete details about your nominee(s) or submit the opt-out declaration.
4. Complete Submission: Submit the form online or offline, depending on your preference.
Enhanced Investor Protection: The new regulations provide greater security for investors by ensuring that their assets are transferred smoothly in case of unforeseen circumstances.
Simplified Procedures: The streamlined nomination process reduces paperwork and makes it easier for investors to nominate beneficiaries.
Clarity and Transparency: The guidelines provide clear guidelines for joint account holders and ensure that there is no ambiguity in the transfer of assets.
- Timeline: Investors must ensure they update their nominations or submit the opt-out forms by the deadline. Failure to do so may limit their ability to trade or invest further.
- Multiple Nominees: Investors can nominate more than one person, specifying the percentage of assets each nominee will inherit.
- Minor Nominees: In case the nominee is a minor, details of a guardian must be provided.
- Opting Out: If an investor chooses to opt out, they should be aware that their legal heirs will need to follow due legal processes to claim assets in the event of the investor’s passing.
SEBI's new rules on nominations for Demat accounts and mutual funds are a significant step toward ensuring investor security and simplifying asset inheritance. Investors must take prompt action to comply with these regulations by either nominating a beneficiary or opting out through a formal declaration. As the deadline approaches, it is essential to review your financial accounts and update your nominations to avoid disruptions in trading or asset management.
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