SEBI to not freeze demat & mutual fund accounts for failing to file nomination

The Securities and Exchange Board of India (SEBI) has relaxed regulations for existing investors by removing the requirement to freeze demat accounts and mutual fund folios if a 'choice of nomination' is not provided. This significant change aims to enhance investor convenience and ease compliance.

SEBI eases norms

Previously, SEBI had set a deadline of June 30, 2024, for all existing individual mutual fund holders to either nominate someone or opt out of nomination. Failure to meet this deadline could have resulted in their accounts being frozen, preventing any withdrawals. However, based on feedback from market participants, SEBI decided that non-submission of 'choice of nomination' will no longer lead to such account freezes, according to a circular issued on Monday.

Moreover, investors holding securities in physical form are now eligible to receive any payments, including dividends, interest, or redemption payments, and can lodge grievances or make service requests from the Registrars to an Issue and Share Transfer Agents (RTAs) without submitting a 'choice of nomination'.

SEBI has also instructed listed companies and RTAs to process payments currently withheld due to the lack of a 'choice of nomination'. While existing investors are relieved from mandatory nominations, all new investors and unitholders must still provide a 'choice of nomination' when opening demat accounts or mutual fund folios, except for jointly held accounts.

Depository participants, asset management companies (AMCs), and RTAs are tasked with encouraging investors to update their nomination choices. They are required to send fortnightly communications via email and SMS to investors who have not yet provided their nominations. From October 1, a pop-up reminder will be displayed on web and mobile platforms when investors log into their demat or mutual fund accounts.

To streamline the process, SEBI has simplified the format for submitting nominations or opting out. Investors need to provide only three mandatory fields: the nominee's name, the nominee's share, and the relationship with the applicant.

This move by SEBI aims to make the nomination process more accessible and user-friendly, ensuring that investors can manage their investments without undue hassle or risk of account freezes.

[With PTI inputs]

Also watch: Nomination for jointly-held mutual fund accounts optional: SEBI