Mutual fund investment: The Securities and Exchange Board of India (Sebi) has introduced new regulations regarding nomination rules for mutual funds and demat accounts in order to address the issue of unclaimed assets and enhance the efficient management of investments in cases of investor illness or death. Effective March 1, 2025, Sebi has amended the rules for mutual fund nominations. Under the revised guidelines, investors are now allowed to nominate up to 10 individuals in their demat accounts or mutual fund folios. It is important to note that the investor must personally declare the nominees and this cannot be done by any Power of Attorney (PoA) holder(s) on behalf of the investor. The nominated individuals may choose to either hold joint accounts with other nominees or have separate single accountsfolios for their respective share of the investment. Key points > The new guidelines require investors to provide detailed information about their nominees, including essential identification details such as the nominee's Permanent Account Number (PAN), driving license number, or the last four digits of their Aadhaar number. Investors must also specify the nominee’s contact details and their relationship to the investor. > Investors now have the option to nominate up to 10 individuals in a mutual fund account, allowing for increased flexibility in asset allocation among family members or close associates. Upon transmission of a joint account or folio, nominees can choose to continue as joint holders with other nominees or open individual accounts or folios for their respective portions, as stated by Sebi. > Sebi has simplified the asset transmission process to the registered nominee in case of an investor's demise. The necessary documents include a self-attested death certificate copy and updating of the nominee's KYC details. > The transfer of assets to the registered nominees will necessitate the submission of the following documents and information: Self-attested copy of the death certificate of the deceased investor Completion, updating, or reaffirmation of the KYC of the nominee(s) Discharge from the creditors is required. > Sebi has required regulated entities, such as mutual fund houses and depositories, to provide investors with the choice to submit nomination forms via both online and offline methods. > Online submissions will be authenticated using digital signature certificates or Aadhaar-based electronic signatures. Additionally, investors will receive a confirmation for each nomination submission to promote transparency. Regulated entities are instructed to retain records of nominations and confirmations for a period of eight years from the date of the account or folio transmission. > The new regulations have been implemented to address the specific difficulties faced by investors who are incapacitated. Under these rules, any nominee has the authority to manage the investor's portfolio, including determining the amount or percentage of assets that can be liquidated and adjusting these guidelines as necessary. > In order to maintain the legitimacy of this process, asset management companies (AMCs) must verify the approval of the incapacitated investor in person, utilising a thumbprint or other independently witnessed mark. It is essential that any funds withdrawn are only transferred to the investor's verified bank account, with no modifications allowed to contact information or associated accounts. > Furthermore, Sebi has directed depositories and the Association of Mutual Funds in India (AMFI) to collaborate on the development of a standardized operating procedure (SOP) aimed at providing additional support for incapacitated investors.
