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Nomination for demat accounts and mutual fund folios

Securities and Exchange Board of India (SEBI) had revised the guidelines on nomination for demat accounts and mutual fund folios.  

Which entities are covered by the guidelines?

The following regulated entities (REs) are covered by the guidelines –

  • Asset Management Companies (AMCs) of Mutual Funds (MFs) and their Registrars to an issue and share Transfer Agents (RTAs) 
  • Association of Mutual Funds in India (AMFI) 
  • Recognized Depositories 
  • Registered Depository Participants (DPs)

What are the guidelines on nomination facility?

  • Nomination shall be mandatory for single holding and optional for jointly held accounts / folios. However, an investor having single holding / account / folio can opt-out of nomination, either online or through physical / offline mode.
  • In case a joint account / folio becomes single holding, post the demise of holders, either nomination or ‘opt-out’, is mandatory.
  • Investors shall have the option to specify guardians when nominees are minors. 
  • Power of Attorney (POA) holders of the investor cannot nominate. 
  • Investors can nominate up to 10 persons in the account / folio.  
  • In case the investor specifies multiple nominees, he / she shall also specify the percentage share for each nominee. Any odd lot after division / fraction of %, shall be transferred to the first nominee mentioned in the nomination form. In absence of such specification, the RE shall apportionment the assets equally among all the nominees. 
  • REs shall provide acknowledgement to the investor for each and every instance, irrespective of the mode of nomination. They shall maintain physical / electronic records of the nomination, its acknowledgement etc. for 8 years after transmission of the folio / account. 
  • REs shall not place any restrictions on the number of instances an investor can make, change or cancel his / her nomination. 
  • REs shall provide in their periodic statement of holding or statement of account, either of the following as per the choice of the investor –
    • names of the nominees or 
    • whether or not nomination has been made by the investor – Y / N

What are guidelines on transfer of deceased account holder’s assets?

  • The nominees shall receive the assets of deceased sole account / sole holders as trustee on behalf of legal heirs of deceased holders. 
  • Legal heirs of nominee shall not be eligible to inherit the assets of the investor, if the nominee predeceases the investor.
  • Upon demise of one of the nominees prior to the demise of the investor and if no change is made in the nomination, the assets shall be distributed to the surviving nominees on pro rata basis upon demise of the investor. Any odd lot after division / fraction of %, shall be transferred to the first nominee mentioned in the nomination form.
  • In case of demise of the investor and any one of the nominees, the REs shall distribute the assets pro rata to the remaining nominees. Any odd lot after division / fraction of %, shall be transferred to the first nominee mentioned in the nomination form.
  • In case of accounts / folio held by Hindu Undivided Family (HUF), upon the death of the Karta, the new Karta would be entitled to operate such an account / folio. In the absence of new Karta, the RE shall effect transmission of account / folio as per dissolution deed and other criteria defined by the respective SRO / industry body in consultation with the SEBI.  
  • In case of any subsisting credit facilities secured by a duly created pledge, the RE shall obtain due discharge from the creditors prior to transmission of assets to the nominees or legal heirs / legal representatives.   
  • Upon transmission of joint account / folio, the nominees shall have the option to either continue as joint holders with the other nominees or open separate single account / folio for their respective portion. 
  • REs shall facilitate / extend co-operation to transfer assets from the nominees to the legal heirs of an investor, as and when approached by either party. 
  • In accounts / folios with multiple nominees, where some portion is transmitted to the nominees and the remaining portion is unclaimed by the other nominees the DP / AMC shall allow the unclaimed portion to continue in the existing account / folio and not permit any other transactions in such accounts / folio, other than transmission to the remaining nominees. However, credit transactions (including through corporate actions) shall be permitted in such accounts / folios.

What are the rules of survivorship?

  • In case of joint accounts / holdings, upon demise of one or more joint holders, the RE shall transmit the assets held to the surviving join holders vide name deletion of the deceased holders. However, the RE shall provide the option to surviving joint holders to transmit the assets held, into another existing or new account / folio.
  • The surviving members shall receive the assets as owners and not as a trustee. 
  • Surviving joint holders shall be entitled to continue with, or change or cancel the nominations made previously.  
  • The mode of operation (of the joint account), namely that of the first named holder OR anyone or survivor OR either or survivor basis OR joint, etc. shall be unaffected by the rule of survivorship.  
  • The norms applicable for operation of the account / folio shall be mutatis mutandis applicable for nomination. 

What if all account holders simultaneously pass away?

  • In case of joint accounts when all joint holders simultaneously pass away, the RE shall transmit the assets in the account / folio to the registered nominees.  
  • In the absence of nomination, the RE shall transmit the assets in the account / folio to either –
    • the legal heirs or legal representatives of the youngest of the joint holders as per the rules of intestate succession or  
    • as per the Will of the latter

What is the role of nominees of incapacitated investors?

  • An investor having single holding / account / folio can, at any point of time, empower any one of the nominees (excluding minor nominee) to operate the investor’s account / folio, if the investor is physically incapacitated, but still has the capacity to contract (excluding investors in ventilator, coma or unconscious). 
  • The investor can change such nominee any number of times, without any restriction.
  • Any encashment by such nominee shall be credited only to the bank account linked to the account / folio of the investor.
  • RE shall not allow any service request, including change in bank account, email address, mobile number etc. by such nominee.    
  • The above provisions shall be applicable for a joint account / folio in the event where all the holders are simultaneously incapacitated.  


References

Securities and Exchange Board of India . (2025, February 28). 'Amendments and clarifications to Circular dated January 10, 2025 on Revise and Revamp Nomination Facilities in the Indian Securities Market'. Retrieved from https://www.sebi.gov.in/legal/circulars/feb-2025/amendments-and-clarifications-to-circular-dated-january-10-2025-on-revise-and-revamp-nomination-facilities-in-the-indian-securities-market_92377.html

Securities and Exchange Board of India . (2025, July 30). 'Extension of timeline for implementation of Phase II & III of Nomination Circular dated January 10, 2025 read with Circular dated February 28, 2025'. Retrieved from https://www.sebi.gov.in/legal/circulars/jul-2025/extension-of-timeline-for-implementation-of-phase-ii-and-iii-of-nomination-circular-dated-january-10-2025-read-with-circular-dated-february-28-2025_95715.html

Securities and Exchange Board of India. (2025, January 10). 'Circular on Revise and Revamp Nomination Facilities in the Indian Securities Market'. Retrieved from https://www.sebi.gov.in/legal/circulars/jan-2025/circular-on-revise-and-revamp-nomination-facilities-in-the-indian-securities-market_90698.html


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