Demat and mutual fund accounts won't be frozen for not filing nomination: Sebi

Making it easier for stock and MF investors to comply with regulations, Sebi on Monday announced that demat accounts and mutual fund folios won't be frozen for non-submission of nomination.

In a circular, the markets regulator said, based on representations received from participants, for ease of compliance and investor convenience, non-submission of 'choice of nomination' shall not result in the freezing of demat accounts as well as MF folios.

In a relief to the investors, Sebi has decided that payments including dividend, interest or redemption payment withheld presently by the listed companies/RTAs, only for want of ‘choice of nomination’ shall be processed accordingly.

The security holders, holding in the physical form, shall now be eligible for receipt of any payment including dividend, interest or redemption payment as well as to lodge grievances or avail any service request from the RTA even if these securityholders have not submitted 'choice of nomination'.

All the new investors/unitholders shall now 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 market regulator also said all existing investors/unitholders shall be encouraged to provide ‘choice of nomination’ for ensuring smooth transmission of securities held by them as well as to prevent accumulation of unclaimed assets in the securities market.

In the case of demat accounts, the depository participants and for mutual funds, the fund houses and RTAs shall encourage the demat account holders/ mutual fund unit holders to update ‘choice of nomination’ by sending a communication on fortnightly basis by way of emails and SMS to all such demat account holders/ mutual fund unit holders who have not provided the ‘choice of nomination’.

The regulator also said to encourage the existing investors to provide 'choice of nomination', a pop-up shall be provided on web/mobile application/platform to the investors by Depositories and Depository Participants while logging into the Demat Account and by AMCs (including MF RTAs, other platforms providing online execution services) while logging into their MF account. This pop-up should be shown only to those clients whose MF Folios/demat account(s) do not have 'choice of nomination'.

Sebi also advised the stock exchange, depositories, fund houses, RTAs and listed companies to take necessary steps to implement the provisions of this circular, including making necessary amendment to the relevant bye-laws / business rules / regulations / operational instructions, bring the provisions of this circular to the notice of their respective constituents and also disseminate this circular on their websites, communicate to SEBI, the status of the implementation of the provisions of this circular, and monitor the compliance of this circular.

All the other provisions related to requirement nomination as mentioned in SEBI circular shall remain unchanged.

The investors now need to fill three fields mandatory for updating nomination details. Investors can add upto three nominees. These three requirements include name of nominee, share of each nominee, and relationship with the applicant.

The non-mandatory details include address of nominee, contact details, email ID , and identification details of nominee.

Sebi vide circular dated December 27, 2023 extended the date for submission of “choice of nomination” for demat accounts and mutual fund folios to June 30, 2024 mentioning that the demat accounts / folios shall be frozen for debits if nomination details are not mentioned.