SEBI’s New Nomination Rules for Demat Accounts & Mutual Funds

The Securities and Exchange Board of India (SEBI) has introduced new nomination rules for demat accounts and mutual fund (MF) folios. These changes aim to simplify the transfer process, reduce paperwork and enhance investor convenience. The updated rules, effective from March 1, 2025, are expected to help with succession planning and minimise legal disputes over asset inheritance.  

Key Changes in Nomination Rules

1. Nomination and Number of Nominees 

• Investors can now nominate up to 10 persons in their demat accounts or MF folios.  
• They can also specify the percentage of assets each nominee should receive,     ensuring a smooth and clear distribution.  
• Single account holders can choose to opt-out of nomination, either online or offline.  

2. Simplified Transmission Process

• In joint accounts, if one holder passes away, the surviving holder(s) can take control of the assets without needing additional KYC, unless it was requested earlier.  
• Nominees inheriting assets can either continue jointly with other nominees or open separate individual accounts for their share.  
• The only documents required for asset transfer to nominees are:  
• Self-attested copy of the death certificate of the investor.  
• KYC completion or update by the nominee(s).  
• Clearance from creditors, if any pledged assets exist.  

3. Power of Attorney & Role of Nominees 

• A Power of Attorney (POA) holder cannot be assigned as a nominee.  
• If an investor becomes physically incapacitated but remains legally competent, they can authorise a nominee to manage their account.  
• Investors can also specify the percentage or exact amount of assets a nominee can access in such situations.  
• This authorisation can be modified any number of times without restrictions.  

4. Reduced Paperwork & Legal Protection 

• Nominees do not need to submit affidavits, indemnities or notarised documents to claim assets.  
• SEBI has ensured that financial institutions cannot be held responsible for any disputes among nominees or legal heirs. Any conflicts must be settled between the nominees and claimants directly.  
• In case of an odd lot division, the extra asset will go to the first nominee by default.  

5. Implementation Timeline

• The new rules came into effect on March 1, 2025.  
• Additional guidelines will be introduced in June 2025 and September 2025 for further refinements.  

Conclusion 

SEBI’s revised nomination framework offers a more structured, transparent and hassle-free approach to asset transmission. By reducing documentation requirements and empowering investors with greater control over their nominations, these changes ensure a smoother and more efficient succession process while safeguarding the interests of both investors and their nominees.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.