The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing changes to streamline nomination procedures for demat accounts and mutual fund folios. The initiative is aimed at improving investor convenience while addressing operational inefficiencies in the current framework.
Default Nomination Framework
A key proposal is to make nomination the default option for all new accounts. Investors who do not wish to nominate would be required to explicitly opt out.
This approach is expected to reduce instances of incomplete nomination details and enhance clarity in account ownership and succession.
Simplified Nominee Information
SEBI has proposed reducing documentation requirements by making only the following details mandatory:
- Nominee’s name
- Relationship with the investor
All other information would remain optional, significantly simplifying the onboarding process. Additionally, the number of nominees per account or folio may be capped at four.
Revised Access Mechanism
In cases where an investor becomes incapacitated, SEBI has suggested that account access should not be directly granted to nominees. Instead, access would be facilitated through a power of attorney (PoA) mechanism.
This change is intended to provide better control, legal clarity, and safeguards in managing investor accounts.
Operational Rationale
The proposals are designed to address practical challenges observed in the existing nomination framework. By simplifying processes and standardising requirements, SEBI aims to:
- Reduce compliance burden for intermediaries
- Improve operational efficiency
- Enhance overall investor experience
Consultation Timeline
The proposals are currently open for public feedback, with stakeholders invited to submit comments until April 7.
Summary
SEBI has proposed making nomination mandatory by default for demat and mutual fund accounts, along with simplified documentation and revised access rules. The changes aim to streamline onboarding, reduce operational complexities, and improve investor experience, while seeking stakeholder feedback before implementation.
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