SEBI, the Securities and Exchange Board of India, has recently announced significant changes to the rules regarding the submission of ‘choice of nomination’ for demat accounts and mutual fund folios. In an effort to simplify investment procedures and improve investor convenience, SEBI has decided to extend the deadline for existing investors to submit their nomination details to June 30, 2024. This extension ensures that existing investors will not have their demat accounts or mutual fund folios frozen for non-submission of nomination details, allowing them to continue accessing their funds and securities without disruption.
Investors holding securities in physical form who have not updated their PAN, choice of nomination, contact details, bank account details, or specimen signature will not face restrictions, starting April 1, 2024. Listed companies will electronically notify security holders of payments, including dividends, interest, or redemption amounts, contingent on their compliance with the updated requirements. SEBI has reduced the mandatory fields for updating nomination details to just three, making the process simpler for existing investors.
SEBI’s circular emphasizes the importance of updating nomination details to ensure a smooth transmission of securities and prevent the accumulation of unclaimed assets in the securities market. While SEBI encourages compliance with the nomination process, security holders with physical folios can lodge grievances or service requests with RTAs without submitting a ‘choice of nomination.’ Payments for dividends, interest, or redemptions will also proceed without these details.
Depository participants, Asset Management Companies (AMCs), and RTAs will send fortnightly reminders via email and SMS to demat account holders and mutual fund unit holders who have not provided their nomination details. A pop-up reminder will also appear when logging into demat or mutual fund accounts, prompting investors to update their nomination information starting October 1, 2024. The new circular provisions, except for the pop-up reminders, will be implemented immediately, with Clause 7 relating to pop-up reminders coming into effect on October 1, 2024.
Stock exchanges, depositories, AMCs, RTAs, and listed companies are required to amend their relevant bye-laws, business rules, and regulations to comply with the new provisions. They must also ensure that these rules are communicated to their constituents and monitor compliance with the updated regulations. Despite the relaxed measures for existing investors, all new investors and unitholders must still provide the ‘choice of nomination’ for demat accounts and mutual fund folios, with detailed formats available in Annexure-A and Annexure-B of the circular.
SEBI’s commitment to protecting investor interests and promoting transparency in the securities market is reflected in this circular. By simplifying the nomination submission process, SEBI aims to enhance investor convenience and encourage broader compliance with essential regulatory requirements. Investors are urged to update their nomination details to continue accessing their funds and securities without any interruptions.
