The Securities and Exchange Board of india (SEBI) has put forward a new consultation paper proposing major changes to how investors nominate beneficiaries for demat accounts and mutual fund folios. These changes are intended to make the process easier, reduce operational friction, and cut down on the growing volume of unclaimed investor assets.
Why SEBI Is Changing the Rules
The existing nomination framework introduced in early 2025 had good intentions but proved difficult to implement smoothly. Investors who chose not to nominate had to go through a cumbersome process involving one‑time passwords (OTPs), declarations, physical forms, or video recordings. This made onboarding slower and discouraged some investors from completing the process.
SEBI’s latest proposals seek to simplify and streamline the nomination system to:
- Reduce friction during account onboarding
- Encourage more investors to nominate beneficiaries
- Minimise the pile‑up of unclaimed assets when investors pass away without a nominee
- Better align securities market practices with standard banking norms
Key Proposed Changes
1. Nomination Will Be the Default Option
Under the new framework, nomination becomes the default setting when opening a new demat account or mutual fund folio. Rather than requiring an active choice to add a nominee, investors will have the option to explicitly opt out. If they choose to opt out, they’ll need to acknowledge the benefits of having a nominee via an onscreen prompt or declaration.
2. Fewer Mandatory Details
SEBI proposes trimming the amount of information investors must provide when adding a nominee. Under the revised norms:
- Only two fields are mandatory:
- Name of the nominee
- Relationship with the investor
- Contact details, address, and other personal information become optional
- If no percentage allocation is specified among nominees, assets will be split equally among them
These changes aim to reduce form‑filling complexity and improve adoption.
3. Fewer Nominees Allowed
Previously, investors could nominate up to 10 individuals for a single account. The new proposal suggests capping this at 4 nominees — closer to what most investors actually use and more in line with operational ease.
4. Clarifying Nominee Rights
SEBI emphasises that a nominee is essentially a trustee — someone who receives the investor’s assets only after their death. They do not have rights over the assets during the investor’s lifetime. The regulator has also recommended removing provisions that allowed nominees to operate the account in cases of investor incapacitation, to prevent misuse and fraud. Instead, investors can rely on tools like Power of Attorney (PoA) if they want someone to manage the account when they can’t.
5. Encouraging Wider Adoption
To improve compliance and uptake of nomination options, SEBI is proposing:
- periodic reminders (SMS and email) to investors without nominations
- user‑platform pop‑ups explaining the benefits of nomination
- public consultation on these changes until 7 April 2026, after which the final norms will be issued
What This Means for Investors
Easier Onboarding
By making nomination default and reducing the required fields, investors will face fewer hurdles when opening demat accounts or mutual fund folios.
Better Protection for Family Members
Simplified nominations increase the likelihood that families can smoothly claim assets without legal hassles after an investor’s death.
Alignment with banking Practices
Standardising nomination norms brings securities market procedures closer to those in banking, where nomination is typically simpler and more consistent.
Next Steps
SEBI has invited feedback from market participants and investors on these proposals. After reviewing comments received by the deadline, SEBI will issue the final rules. Once implemented, these changes could make investor onboarding and estate planning much smoother for millions of demat account and mutual fund holders across India.
Disclaimer:
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