The Securities and Exchange Board of India (SEBI) continues to lead the way in refining regulatory norms, ensuring the Indian securities market remains efficient, transparent, and investor-friendly. On January 10, 2025, SEBI released a circular detailing a revised and revamped framework for nomination facilities in demat accounts and mutual fund (MF) folios. This update addresses critical gaps, aims to prevent unclaimed assets, and provides a streamlined process for asset transmission.
The circular, applicable to asset management companies (AMCs), depositories, depository participants, and other stakeholders, is structured into two sections. It reiterates existing norms while introducing enhancements to ensure consistency and ease of implementation across the securities market.
- Reinforcing the Rule of Survivorship
Under the rule of survivorship, joint account holders’ assets will be transferred to the surviving members upon the death of one or more holders. The surviving members become rightful owners, retaining the ability to manage or modify existing nominations. Importantly:
- Joint account operation modes (e.g., “anyone or survivor”) remain unaffected.
- Existing norms for account operations apply equally to nominations.
This approach balances operational clarity with flexibility for surviving holders.
- Addressing Simultaneous Death of Joint Holders
In the rare case of simultaneous demise of all joint account holders:
- Assets will be transmitted to the registered nominee(s).
- If no nominee exists, assets will go to legal heirs or representatives of the youngest account holder based on intestate succession laws or as per the holder’s will.
This ensures a well-defined path for asset distribution, reducing ambiguity and delays.
- Provisions for HUF Accounts
For accounts held by a Hindu Undivided Family (HUF), upon the Karta’s death:
- The new Karta will assume account operations.
- In the absence of a new Karta, asset transmission will follow dissolution deeds and applicable legal guidelines.
This addresses unique requirements of HUF accounts, ensuring compliance with traditional and legal norms.
- Enhanced Integrity in Nomination Processes
To maintain transparency and authenticity, SEBI has introduced stringent measures:
- Nomination forms can be submitted online or offline.
- Online submissions require digital or Aadhaar-based e-signatures, or two-factor authentication.
- Offline submissions mandate signature verification or, in the case of thumb impressions, witnessing by two individuals.
- Regulated entities must acknowledge all nomination-related changes and maintain records for eight years post-transmission.
These measures safeguard the integrity of the nomination process while embracing digital convenience.
- Additional Norms for Nomination
SEBI has introduced several investor-centric features:
- Mandatory nomination for single accounts; optional for joint accounts.
- No restrictions on the frequency of nomination changes.
- Inclusion of nominees’ details in periodic statements, based on investor preferences.
- Pro rata distribution of assets if a nominee predeceases the account holder.
These norms ensure flexibility, transparency, and investor autonomy.
Conclusion
SEBI’s revamped nomination framework is a significant step toward simplifying the asset transmission process while enhancing operational efficiency. By addressing common challenges and introducing technology-driven solutions, SEBI aims to minimize unclaimed assets and ensure rightful asset transmission.
For investors, this is an opportunity to revisit their nomination details, ensuring alignment with the updated norms. For regulated entities, compliance with these guidelines will help build trust and credibility in the evolving securities market landscape.
This progressive initiative reinforces SEBI’s commitment to fostering a secure and investor-friendly market.
