In a move aimed at simplifying regulatory compliance for stock and mutual fund investors, the Securities and Exchange Board of India (SEBI) announced on Monday that demat accounts and mutual fund folios will no longer be frozen for failure to submit nominations.
The decision comes following feedback from stakeholders, with SEBI emphasizing investor convenience and ease of compliance. Consequently, the withholding of payments such as dividends, interest, or redemption payments by listed companies and Registrar and Transfer Agents (RTAs) due to lack of nomination choices will now be processed.
Furthermore, holders of physical securities will now be eligible to receive payments and access services from RTAs even without submitting nomination choices.
While new investors and unit holders are still required to provide nomination choices, except for jointly held accounts, existing investors are encouraged to do so to facilitate smooth asset transmission and prevent accumulation of unclaimed assets.
To ensure compliance and facilitate the updating of nomination choices, depository participants, mutual fund houses, and RTAs will actively encourage investors to provide nominations. This will be done through fortnightly communications via email and SMS for those who have not yet submitted their choices.
In addition, a pop-up prompt will be provided on web and mobile platforms for investors to update their nomination choices. This prompt will only appear for those accounts lacking nomination details.
SEBI has advised stock exchanges, depositories, fund houses, RTAs, and listed companies to implement these provisions. Necessary amendments to relevant bye-laws, business rules, regulations, and operational instructions should be made, and stakeholders must disseminate this circular on their respective websites.
The updated process requires investors to fill three mandatory fields for nomination details: nominee name, share of each nominee, and relationship with the applicant. Optional details include the nominee’s address, contact information, email ID, and identification details.
SEBI’s circular, dated December 27, 2023, extended the deadline for submitting nomination choices to June 30, 2024, noting that failure to do so would result in the freezing of demat accounts and folios for debits.
