Sebi Extends Timeline For Implementation Of Nomination Norms For Demat Accounts, Mutual Fund Folios - Know Why

The capital market regulator, Securities Exchange Board of India (Sebi) announced via a circular that it has extended the timeline for the implementation of revised norms governing nomination for demat accounts and mutual fund (MF) folios.

Earlier in February, the market regulator had said that the norms would be implemented in three phases. Some norms would be implemented in Phase 2, which would begin on June 1 and some in Phase 3, which would start on September 1. The market watchdog has delayed the timeline for implementing the Phase 2 to August 08, 2025 and the Phase 3 to December 15, 2025.

Why Did Sebi Extend The Implementation Timeline

Sebi mentioned in the circular that the timeline for the implementation of the revamped nomination norms has been extended after it received requests from several industry stakeholders, such as the CDSL and NSDL, depository participants and Association of National Exchanges Members of India (ANMI) and Commodity Participants Association of India (CPAI) to do so.

The industry stakeholders mentioned that they needed more time to carry out the system developments which are pre-requisites the for implementation of Phase II of the revamped norms. Sebi also mentioned that the timeline for implementation of Phase 3 norms has been delayed to provide depository participants sufficient time to undertake the requisite development and testing.

Sebi’s Bid To Revise and Revamp Nomination Facilities

Earlier in February, Sebi released a circular seeking to revise and revamp nomination facilities for the nomination of demat accounts and mutual fund (MF) folios in order to curb the problem of unclaimed assets in the securities market.

Some of the key norms introduced in the circular included giving investors the ability to nominate up to 10 people as nominees. As a part of the revamped norms, Power of Attorney (POA) Holder(s) of the investors will not have the ability to appoint nominees. In case the transmission of a jointly held account or folio occurs, the nominees will have the option to continue as joint holders or open separate single account or folio for their respective portion as per the circular.

According to the revamped norms, in case of the original investor being incapacitated, he or she will be able to empower any one of the nominees to operate the account. Investors will also be allowed to change the mandate without any restriction as many times as they deem fit. The market regulator also directed asset management companies or other regulated entities to handle such requests for incapacitated investors by sending responsible officers to visit the investor after receiving such an intimation. Notably, requests for such transfers will need to accompany a medical certificate which mentions the reason for the inability to affix a signature by the investor and their tenure.

Sebi has also tried to ease the process of transmission of assets, such as demats or folios, by reducing the number of documents required. Notably, the regulated entities will now need the following documents for transmission of assets to registered nominees:

• Self-attested copy of the Death Certificate (by the nominee/s) of the deceased investor

• Due completion, updating or reaffirming of the KYC of nominees

• Due for discharge from the creditors if there are subsisting credit facilities secured by a duly created pledge

As a part of the revamped norms, the market regulator has also directed regulated entities to create an online mechanism for existing and new investors who want to opt out of the nomination process.