The Securities and Exchange Board of India (SEBI) has issued a new circular on June 10, 2024, aimed at easing investment procedures and addressing compliance issues for existing investors in the Indian securities market. This circular, directed to various stakeholders including recognized stock exchanges, depositories, mutual funds, asset management companies (AMCs), and other related entities, introduces significant changes to the regulations concerning the submission of ‘choice of nomination’ for demat accounts and mutual fund folios.
Key Highlights of the Circular
Non-Submission of ‘Choice of Nomination’: No Freezing of Accounts: SEBI has decided that the non-submission of ‘choice of nomination’ will no longer result in the freezing of demat accounts and mutual fund folios. Previously, accounts could be frozen for debits if this information was not provided by June 30, 2024.
Processing of Payments: Security holders with physical form securities will continue to receive payments such as dividends, interest, or redemption amounts even if they have not submitted their ‘choice of nomination’. This also applies to lodging grievances or availing any service requests from Registrars to an Issue and Share Transfer Agents (RTAs).
Encouragement for Nomination Submission: While freezing of accounts for non-submission of nomination details has been done away with, SEBI encourages all existing investors to provide their ‘choice of nomination’ to ensure smooth transmission of securities and to prevent the accumulation of unclaimed assets in the market.
Streamlined Update Process: Only three mandatory fields are required for updating nomination details, simplifying the process for investors.
Proactive Communication: Depository Participants (DPs) and AMCs, along with RTAs, are instructed to encourage investors to update their nomination details through regular communication. This includes fortnightly reminders via email and SMS to those who have not yet provided their nomination details. From October 1, 2024, a pop-up reminder will appear on web and mobile applications of depositories and AMCs, prompting investors to update their nomination information when they log into their accounts.
Supersession of Previous Provisions: The provisions of this circular, except for the implementation of pop-up reminders, take effect immediately, superseding previous regulations.
Responsibility and Compliance: Stock exchanges, depositories, AMCs, RTAs, and listed companies are advised to take necessary steps to implement the provisions of this circular. This includes updating relevant bye-laws, business rules, regulations, and operational instructions. They are also required to disseminate this circular through their websites and communicate the status of implementation to SEBI.
