SEBI updates Nomination Rules for Demat and Mutual Fund Accounts

The Securities and Exchange Board of India (SEBI) has announced major changes to the nomination process for demat accounts and mutual fund portfolios.

The new rules aim to make investing simpler, reduce unclaimed assets, and ensure a smoother transfer of investments to nominees in the future.

These changes will come into effect from September 1, and could impact both new and existing investors.

Why Has SEBI Changed the Rules?

One of the biggest challenges in the investment ecosystem is the growing amount of unclaimed financial assets after an investor’s death.

To address this issue, SEBI has introduced a more structured nomination process that makes it easier for nominees to access investments while also simplifying procedures for investors.

 Investors Can Add Up to Three Nominees

Under the new rules, investors will be allowed to nominate up to three individuals for a demat account or mutual fund portfolio.

This gives investors greater flexibility when planning how their assets should be distributed in the future.

Nomination Becomes Mandatory for New Single-Holder Accounts

Starting September 1, anyone opening a new demat account or mutual fund folio in a single name must either:

Add a nominee, or

Officially opt out of nomination.

Without completing one of these options, the account cannot be opened in single-holder mode.

Joint Account Holders Get More Flexibility

For jointly-held demat accounts and mutual fund portfolios, nomination will remain optional.

This means joint investors can decide whether they want to nominate someone or continue without a nominee.

All Joint Holders Must Approve Nomination Changes

SEBI has also tightened the rules for changing nominees in joint accounts.

If investors want to add, remove, or modify a nominee, every joint account holder must provide consent, regardless of how the account is operated.

This step is intended to improve transparency and prevent disputes in the future.

Nominees Can Continue the Investment Account

One of the most significant changes relates to what happens after an investor’s death.

Under the revised framework, nominees will have the option to:

Continue operating the existing demat account or mutual fund folio, or

Open separate accounts to receive their share of the assets.

This could make the transfer process much smoother for family members and beneficiaries.

More Flexibility for Investors

SEBI has also introduced several investor-friendly changes to simplify the nomination process.

Unlimited Nomination Changes

Investors can now add, modify, or cancel nominations as many times as they wish.

There is no limit on the number of nomination updates that can be made.

Online and Offline Submission Allowed

Nomination requests can be submitted through both online and offline channels.

For online submissions, verification can be completed using:

Digital Signature

Aadhaar-based e-sign

Two-factor authentication (OTP on registered mobile number and email)

For offline submissions, witness signatures will generally not be required if the investor signs normally.

However, if a thumb impression is used, two witnesses will still be required.

Systems Will Be Updated Before September 1

SEBI has instructed depositories, mutual fund houses, and other regulated entities to update their systems before the new rules take effect.

The regulator has also clarified that these guidelines will replace all previous circulars related to nominations in demat accounts and mutual fund folios.

For investors, the changes are expected to make nomination easier, improve succession planning, and reduce the chances of investments remaining unclaimed in the future.