Individual mutual fund investors and demat account holders must comply with the Securities and Exchange Board of India (Sebi) directive and submit nomination declarations or opt out of nominations before December 31, 2023.
Kashmira Kalwachwala, Head of Investor Services, Tata Asset Management, said, “As we approach the deadline set by Sebi for adding nominees to mutual fund portfolios—now extended to December 31, 2023— it’s crucial for investors to understand the significance of this mandate. Nomination is not just a regulatory requirement; it’s a strategic and cost-effective move to ensure a seamless transition of assets in the unfortunate event of the sole unitholder’s or all unit holders’ demise.”
If investors don’t nominate their holdings by the deadline, Sebi might freeze withdrawals from their accounts. This means they won’t be able to take out funds from mutual funds or use their demat accounts for trading. Notably, investors who’ve already submitted their nomination details need not do so again. Besides, it is voluntary in the case of trading accounts.
“Allowing up to three nominees, the nomination process simplifies and expedites the claiming of funds, providing a quick and efficient route for the appointed claimants. This minimises legal complexities and reduces the need for extensive documentation when the nomination is in place. On the other hand, the absence of correct nominee details can complicate the transmission process, leading to potential disputes and prolonged legal procedures for the family or legal heirs,” said Kalwachwala.
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Sebi’s circular in June 2022 underscores the regulatory push toward securing investors’ financial legacies. The extended deadline emphasises the urgency for investors to update their nominations, as failure to do so or opting out will result in the freezing of mutual fund folios, added Kalwachwala.
Investors have the liberty to update the nominees linked to their demat account. They can do so by filling out a nomination form and delivering it to their Depository Participant (DP) whenever they choose, allowing for alterations at their convenience. Alternatively, they can opt for the online process to accomplish these necessary changes.
In conclusion, the nomination process is not just a compliance checkbox—it’s a critical aspect of effective succession planning. Investors should act promptly, ensuring updated nominations in their mutual fund folios, safeguarding their financial interests and preventing potential family conflicts in times of distress.
