Change in mutual fund nomination rules: Add up to 10 nominees easily

Under the revised framework, investors can allocate their mutual fund assets among family members or associates with ease, promoting efficient wealth transmission.

The Securities and Exchange Board of India (SEBI) has announced changes to mutual fund nomination rules that aims at offering greater flexibility and transparency to investors. These revamped guidelines, set to take effect from March 1, 2025, allows mutual fund investors to nominate up to 10 individuals, addressing long-standing issues related to unclaimed assets and improving the management of investments in cases of investor incapacity or death.

The updated rules are designed to enhance convenience for investors while ensuring a secure and transparent nomination process. Under the revised framework, investors can allocate their mutual fund assets among family members or associates with ease, promoting efficient wealth transmission. However, the declaration of nominees must be made personally by the investors, as Power of Attorney (PoA) holders are not authorized to perform this task.

As part of the new process, investors are required to provide comprehensive details of each nominee. This includes their Permanent Account Number (PAN), Aadhaar, or driving licence number, along with contact information and their relationship to the investor. Nominees can opt to hold joint accounts or maintain individual accounts for their allocated shares.

SEBI has also simplified the transmission of assets in the event of an investor's demise. Essential documents, such as a self-attested copy of the deceased’s death certificate and updated Know Your Customer (KYC) details of the nominee, will suffice for asset transfer. Furthermore, both online and offline nomination submission options will be available.

Online nominations will be subject to verification using digital signatures or Aadhaar-based electronic signatures. Records of these transactions will be retained for eight years following the account transmission. To protect incapacitated investors, nominees will have the authority to manage portfolios and withdraw assets within predefined limits. Asset Management Companies (AMCs) are required to verify investor approval personally, using thumbprints or independently witnessed marks.

Funds will be transferred only to verified bank accounts, with stringent measures in place to prevent unauthorized changes to contact or account information. These measures ensure the integrity and legitimacy of transactions.