Demat, MF nomination to change: SEBI proposal explained in 10 points

Capital market regulator SEBI has released a consultation paper aimed at modifying nomination norms for demat accounts as well as mutual fund portfolios. The move is broadly aimed at simplifying investor on-boarding while aligning processes with banking standards. It is also viewed as a key measure to prevent the creation of unclaimed assets. The regulator has invited public comments until April 7.

Here are 10 key things to know about this consultation paper:

• The SEBI-proposed steps are aimed at addressing operational challenges identified after the issuance of a previous circular, dated January 10, 2025.
• The regulator has proposed making nomination the default choice for all single accounts or portfolios opened after a specified date.
• Investors will be required to explicitly submit a consent to opt out of nomination. This move is intended to prevent the creation of unclaimed assets.
• Investors not wishing to nominate will have to select 'opt-out of nomination' in a pop-up message that will appear on the screen. The message will be clearly explaining the benefits of nomination.
• The mandatory information required for a nominee will be reduced to only the name and the nature of the relationship with the investor.
• Details like address, mobile number, email and percentage share will be optional.

• SEBI is of the view that the current process has led many to drop off during on-boarding.
• In case a clear percentage share is not specified, the assets will be apportioned among the nominees equally.
• The maximum number of nominees will be revised to four, in line with the current banking norms. In January 2025, this limit was proposed to be 10.
• The consultation paper further addresses the role of nominees during an investor's lifetime. The existing Power of Attorney mechanism should be used for situations where an investor is incapacitated but still has the capacity to contract, according to SEBI.

Why has SEBI proposed these changes?

Low nomination uptake

Many investors skip nomination due to complex forms, leading to large unclaimed assets across financial systems.

Banking alignment

Bringing nominee limits and processes closer to banking norms improves standardisation and ease of use.

Operational efficiency

Reducing nominee details cuts friction for investors and lowers compliance burden for intermediaries.

Legal clarity

Reaffirming that nominees act as trustees, and not owners, after death avoids disputes with legal heirs.

Risk mitigation

Default nomination ensures assets are not left unclaimed, a long-standing issue in India’s financial ecosystem.

Here are answers to frequently asked questions (FAQs) on the subject:

What has the market regulator proposed?

It has issued a consultation paper to simplify nomination rules for demat accounts and mutual funds.

What is the deadline for feedback?

Public comments are invited until April 7.

What is the aim of these proposals?

SEBI wants to ease investor onboarding, aligning with banking norms while reducing unclaimed assets.

Can investors opt out?

Yes.

How will they be able to opt out?

They will be required to respond to a pop-up message requiring user consent.

Why is SEBI making these changes?

The regulator aims to fix operational issues seen after its January 2025 circular.