SEBI To Not Freeze Demat Accounts, Mutual Fund Portfolios Over Non-Nomination

The Securities and Exchange Board of India relaxed regulations for existing investors by abolishing the rule that mandated freezing demat accounts and mutual fund portfolios if a choice of nomination was not provided.

Investors possessing securities in physical form are entitled to receive any payments, such as dividends, interest, or redemption amounts. They can also submit grievances or request services from Registrars to Issue and Share Transfer Agents without having submitted a choice of nomination.

Previously, the regulator had established June 30 as the deadline for all current individual mutual fund holders to either nominate a beneficiary, or formally decline to do so. Non-compliance with this regulation could result in the freezing of their accounts, preventing any withdrawal.

Based on representations received from the market participants, for ease of compliance and investor convenience, SEBI has decided that for existing investors or unitholders, non-submission of choice of nomination will not result in the freezing of demat accounts as well as mutual fund folios, according to a circular on Monday.

The regulator said that payments withheld presently by the listed companies or RTAs for not submitting a choice of nomination will be processed accordingly.

All new investors/unitholders would continue to be required to mandatorily provide the choice of nomination for demat accounts/mutual fund folios (except for jointly held demat accounts and mutual fund folios), the markets regulator said.

The regulator has asked depository participants, AMCs or RTAs, to encourage demat account holders or mutual fund unitholders, respectively, to update choice of nomination by sending a communication on a fortnightly basis, by way of emails and SMS to all such investors who have not provided the choice of nomination.

The communication should provide guidance for demat account holders/ mutual fund unit holders to provide a choice of nomination.

To encourage the existing investors to provide a choice of nomination, a pop-up would be provided on the web or mobile platform to the investors by depositories and depository participants while logging into the demat account, and by AMCs while logging into their MF account from Oct. 1.

SEBI has also provided a format for providing nomination and opting out of nomination, both in the case of demat account and MF folios. It said that only three fields need to be provided mandatorily for updating nomination details—name of the nominee, share of the nominee and relationship with the applicant.

(With text inputs from PTI)