SEBI Modifies Nomination Rules for Demat Accounts and Mutual Fund Folios

SEBI Revises Nomination Rules for Demat Accounts and Mutual Fund Folios

SEBI has modified the norms governing nomination facilities for demat accounts and mutual fund folios following representations from stakeholders regarding operational challenges in implementing the earlier framework.

The revised rules are aimed at making investor onboarding and the nomination process easier while helping prevent securities and mutual fund holdings from becoming unclaimed assets.

SEBI Nomination Rules: Key Changes

For newly opened single-holder demat accounts and mutual fund folios, investors will generally be required to provide a nomination unless they submit an opt-out declaration.

For jointly held demat accounts and mutual fund folios, nomination will remain optional. However, the consent of all joint holders will be required to provide or change a nominee, regardless of the mode of operation of the account.

Investors will also be allowed to nominate up to three persons. If multiple nominees are named, they may either continue with the same account or folio after the investor's death or open separate accounts or folios for their respective holdings.

SEBI Allows Online and Offline Nomination

Investors will have the option to submit nomination forms either online or offline.

For online nomination, regulated entities can use digital signatures, Aadhaar-based e-sign or other recognised e-sign facilities. They may also use two-factor authentication, with one factor being a one-time password sent to the investor's registered mobile number and email address.

For physical or offline nomination, the form must generally be signed by the account or folio holder. A witness will not be required when a wet signature is used. If a thumb impression is used instead, the form must be witnessed by two persons.

SEBI Nomination: Opt-Out and Changes

Investors who do not wish to appoint a nominee can opt out by submitting the prescribed declaration or selecting the online opt-out option.

Investors can also provide, change or cancel their nomination any number of times. The revised nomination forms will apply to both new and existing investors, and regulated entities must provide an acknowledgement for each nomination or subsequent change.

When investors do not have a nomination, including those who have opted out, Depository Participants and Mutual Fund RTAs will be required to send bi-annual messages encouraging them to provide a nomination.

They must also display a pop-up explaining the benefits of nomination when the investor first logs in each day, subject to the conditions specified by SEBI.

SEBI Modified Nomination Rules: Key Highlights

• Effective Date: September 1, 2026
• Single-Holder Accounts/Folios: Nomination generally mandatory unless the investor opts out
• Joint Accounts/Folios: Nomination remains optional
• Maximum Nominees: Up to three persons
• Nomination Mode: Online or offline
• Opt-Out: Investors can choose to opt out through the prescribed declaration or online option
• Changes/Cancellation: Nomination can be provided, changed or cancelled any number of times
• Existing Accounts/Folios: The revised provisions also apply to existing accounts and folios
• Investor Acknowledgement: Regulated entities must provide acknowledgement for each nomination or subsequent change
• Investor Communication: Investors without nomination may receive periodic reminders from Depository Participants or Mutual Fund RTAs

What Investors Should Know

Investors opening single-holder demat accounts or mutual fund folios should be prepared to provide a nomination or formally opt out under the revised framework.

Existing investors can review, update or cancel their nominations as needed.

Investors can nominate up to three persons and may provide optional details such as the nominee's contact information and percentage share.

If the percentage share is not specified for multiple nominees, the assets will generally be divided equally among them.

Investors who opt out should understand that nomination can help simplify the transfer of securities to legal heirs after the investor's death. Without a nomination, additional legal or court documents may be required, potentially delaying the transmission process.