SEBI has proposed to abolish the rule of compulsory nomination. At present it is mandatory for the investor to make nomination or it is necessary for him to inform that he does not want to make nomination. This is necessary for investors of joint demat accounts and schemes of mutual funds.
SEBI has released a consultation paper on 2 February. In this, an attempt has been made to simplify the process of transfer of financial assets of an investor to his family member in case of his death. SEBI has proposed to amend the nomination facility currently available for demat accounts and mutual funds. After the implementation of the new rules, the nomination process will become easier. SEBI has sought public opinion on this consultation paper till March 8.
SEBI has extended the deadline for nomination several times.
SEBI has proposed to abolish the rule of compulsory nomination. At present it is mandatory for the investor to make nomination or it is necessary for him to inform that he does not want to make nomination. This is necessary for investors in joint demat accounts and schemes of mutual funds. Many investors have not made nominations. SEBI has extended the nomination deadline for such investors several times.
A large number of investors do not want to make nominations.
Last time it was extended to June 2024. Many people having joint accounts have faced problems in nomination. Especially there has been difficulty in making nomination through online mode. Nomination will continue to be mandatory for single accounts/investments. What is a matter of concern is that SEBI data shows that a large number of investors in many single mutual fund folios or single demat accounts have not made nomination or have opted not to make nomination.
If there is no nomination, there is a problem in transfer of assets.
Experts say that due to lack of nomination, it becomes difficult for investors to transfer their financial assets to their family members after their death. Therefore the investor should always use the nomination option. He should give the name of a family member as a nominee.
Old methods of property transfer will be recognized
Rajat Dutta, founder of Inheritance Needs Services, a company providing inheritance-related services, said that SEBI has recognized the methods of transfer of assets to heirs through will or trust. If both of these are not present, the relevant succession law applies. SEBI’s stand in this regard is in accordance with a decision of the Supreme Court. The Supreme Court had given its decision in a case in December 2023.
Currently allowed to make maximum three nominees
According to the current rules, a maximum of three nominees can be made for a demat account and mutual fund folio. This number can be increased to double digits in SEBI’s consultation paper. But, what is its purpose is not yet clear, because if there is more than one nominee, it is mandatory to disclose the proportion of stake in the asset. This makes the whole process complicated.
