NEW RULES FOR MUTUAL FUND NOMINATIONS

Now, investors will be able to nominate up to 10 individuals for each account or folio, with the option to assign percentage allocations

-  -Narayan Krishnamurthy

The Securities and Exchange Board of India (SEBI) has recently announced new guidelines to streamline the nomination process for mutual fund folios and demat accounts. These new rules allow investors to nominate up to 10 individuals for each account or folio, with the option to assign percentage allocations to each nominee. The nominees can either continue as joint holders or open separate single accounts/folios for their respective portions. Set to take effect on March 1, the guidelines apply to both investors and regulated entities, including asset management companies (AMCs).

A key update involves the rule of survivorship, whereby assets in joint accounts will be transferred to the surviving holders without impacting prior nominations or operational agreements. The market regulator has also introduced new measures to validate and authenticate nominations to enhance security and transparency.

So, investors who do not specify allocation percentages among their nominees will have their assets distributed equally. If the investor and one of the nominees die, the remaining nominees will receive their shares on a pro-rata basis. SEBI clarified that nominees will act as trustees for the legal heirs of the account holder, rather than having direct inheritance rights if the nominee predeceases the investor.

The guidelines include provisions for both digital and physical submission and updating of nominations.