SEBI proposes new nomination rules for demat, MF accounts for simplicity

SEBI has released a consultation paper proposing to make nomination the default for demat and MF accounts. The plan includes an explicit opt-out process, simplified nominee information, and an increased limit of four nominees to ease investor onboarding.

The Securities and Exchange Board of India (SEBI) has issued a consultation paper to modify nomination norms for demat accounts and mutual fund folios, aimed at simplifying investor on-boarding and aligning processes with banking standards. Released on March 17, 2026, the proposal seeks to address operational challenges identified after the issuance of a previous circular dated January 10, 2025. The regulator has invited public comments on these suggestions until April 7, 2026.

Default Nomination and Opt-Out Framework

SEBI has proposed making nomination the default choice for all single accounts or folios opened after a specified date. Under this framework, any investor who does not wish to nominate will be "specifically required to choose 'opt-out of nomination'". This move is intended to prevent the creation of unclaimed assets. If an investor chooses to opt out, a pop-up message explaining the benefits of nomination and a declaration will be displayed, and the investor must "provide consent in this pop-up message to opt-out from nomination".

Simplified Nominee Details

SEBI has also suggested reducing the mandatory information required for a nominee to only their name and the nature of the relationship with the investor. Other details, such as address, mobile number, email, and the percentage share of each nominee, are proposed to be optional. The regulator noted that "the process of furnishing so many details of the nominee is onerous for investors" and has led to many dropping off during on-boarding. If a percentage share is not specified, the assets will be "apportioned among the nominees equally".

Revised Nominee and Joint Holder Limits

Regarding the number of nominees, SEBI has proposed increasing the limit to four, matching current banking norms, instead of the ten previously suggested in the January 2025 circular. Data reviewed by the regulator showed that a very low percentage of investors actually opted for more than one nominee. SEBI stated that "increasing the nominees to 10 may create a strain on the system leading to operational issues". While the nominee limit may increase, the maximum number of joint holders in an account will remain three.

Clarification on Nominee's Role

The consultation paper further addresses the role of nominees during an investor's lifetime. The industry had represented that a facility allowing nominees to operate accounts in case of investor incapacitation was "challenging due to high implementation costs and the difficulty in maintaining audit trails". SEBI observed that "a nominee becomes trustee of the assets only upon the demise of the investor". Consequently, it has proposed that the existing Power of Attorney mechanism should be used for situations where an investor is incapacitated but still has the capacity to contract. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)