EASY TRANSFER OF MUTUAL FUND HOLDINGS

A recent SEBI circular introduces smooth transmission of investments to family members after an investor's demise

- Narayan Krishnamurthy

If you are a mutual fund investor, you would have experienced the clamour over registrars, asset management companies (AMCs) and distributors nudging you to update the nomination space in your investment papers. To ensure easy transfer of investments in case of death of the investor, the market regulator SEBI (Securities and Exchange Board of India) has been mandating that investors update their nominations. The deadline to complete this action has been extended, but the regulator's intention is clear-to ensure smooth transfer of assets after an investor's demise.

The next step is the recent Sebi circular about introducing a centralised mechanism to record an investor's demise across investment products at one go, which will come into effect from January 1, 2024. The last day for updating one's nominee in mutual fund investments is now December 31, 2023, for smooth processing of one's papers.

Currently, there are multiple stakeholders of import when it comes to mutual fund investments-there is the distributor through whom one may be investing, the AMC in whose schemes one invests, the RTA (registrar and transferring agent) who manages the investment-related records for mutual funds. So, in case of reporting an investor's demise, the family members and nominees need to inform multiple entities to process the investments of the deceased investor.

With the new development, Sebi has introduced a centralised system through which a nominee can reach a mutual fund company or a registrar to report the demise of an investor and, subsequently, it will get updated across all fund houses. There will be no need to reach out to another RTA or AMC to update the demise. Nominees will still need to reach out to different AMCS to make a request for the transfer of MF units, but the documentation process will get simpler and proceeds will reach the nominee's account faster.