The Securities and Exchange Board of India (Sebi), on March 17, proposed a simplified nomination framework for demat accounts and mutual fund folios. Through these proposals outlined in the consultation paper released earlier today, the regulator aims to ease investor onboarding and reduce unclaimed assets.
The regulator said it plans to “modify the circular on ‘Revise and revamp Nomination Facilities in the Indian Securities Market’… to enhance the ease of investor onboarding and ease the nomination process by aligning with the banking norms on nomination.”
Nomination To Become Default
In a key shift, Sebi proposed making nomination the default option while opening new demat accounts and mutual fund folios. Investors who do not wish to nominate will have to explicitly opt out.
“Providing nomination should be the default mode… and investors who do not wish to nominate will have to specifically choose opt-out and consent to the pop-up message displayed,” the regulator said.
For existing accounts without a nomination, intermediaries will send periodic reminders through SMS and email, nudging investors to add nominees.
Fewer Details To Reduce Friction
Sebi proposed reducing the information required for nomination. Only the nominee’s name and relationship with the investor will be mandatory. Details such as address, mobile number, email ID and percentage share will be optional.
The regulator said the current process is cumbersome. “The process of furnishing so many details of the nominee is onerous for investors, and as a result, many investors are dropping off onboarding.”
If investors do not specify the share of nominees, the assets will be distributed equally among them.
Nominees Limited To Four
Sebi proposed limiting the number of nominees to four. Earlier, it had allowed up to 10 nominees under the January 2025 circular.
This proposal came after the regulator received industry feedback and internal data, which showed very low usage of multiple nominees and highlighted concerns around operational complexity.
Nominee role during incapacity scrapped
The regulator proposed removing the earlier provision that allowed nominees to operate accounts in case the investor becomes incapacitated.
Sebi flagged concerns around “high implementation costs,” “difficulty in maintaining audit trails,” and risks of “fraud, misuse of accounts, and future legal disputes.” Instead, it has suggested using the existing Power of Attorney (PoA) mechanism in such cases.
Other Proposals
Sebi also proposed easing the opt-out process by removing requirements such as video recording or physical submission. Investors can now opt out through a simple declaration with an online confirmation.
“Any investor not wanting to nominate shall be specifically required to choose ‘opt-out’ of nomination,” Sebi said.
What It Means For Investors
The regulator said the proposed changes are intended to simplify processes and encourage wider adoption of nominations, which helps in faster transmission of assets and reduces the build-up of unclaimed investments.
The proposed changes could make the account opening process faster and with fewer hassles, by reducing paperwork and the lengthy steps involved in nomination. Sebi has invited public comments on the proposals till April 7, 2026.
