Sebi eases nomination rules for demat accounts, mutual funds. Check full details

Capital markets regulator Sebi has relaxed nomination norms for demat accounts and mutual fund folios, making the process simpler for investors while continuing its push to reduce the buildup of unclaimed financial assets.

In a circular issued on Friday, the regulator said investors opening single-holder demat accounts or mutual fund folios after September 1, 2026, will be required to either nominate a beneficiary or formally opt out through a declaration.

The move modifies rules introduced last year after market participants flagged operational challenges in implementing the earlier framework.

Sebi said the revised norms are aimed at improving ease of investing and simplifying the nomination process.

Under the new framework, nomination will remain mandatory for single-holder accounts unless the investor explicitly chooses to opt out. For jointly held accounts and folios, however, nomination will be optional.

Investors will be allowed to appoint up to three nominees.In a significant simplification, Sebi has removed the requirement for a witness signature when investors submit nomination forms with a regular signature. A witness will now be required only when an investor uses a thumb impression instead of a signature.The regulator has also reduced the amount of information investors must provide while filing nominations.

Only the nominee’s name and relationship with the investor will be mandatory. In the case of minor nominees, the date of birth will also be required.

Details such as mobile number, email address, percentage share, Aadhaar, PAN, passport or other identification documents will remain optional.

Where multiple nominees are appointed but percentage allocation is not specified, the assets will be distributed equally among the nominees.

Sebi has also expanded digital options for filing nominations. Investors will be able to submit nominations online using a digital signature certificate, Aadhaar-based e-sign, any recognised e-sign facility, or through two-factor authentication using a one-time password sent to their registered mobile number and email address.

The regulator has directed depositories, depository participants, mutual fund registrars and asset management companies to provide both online and offline nomination facilities. The revised framework also allows investors to modify or cancel nominations any number of times.

For jointly held accounts, all account holders must consent to any nomination or nomination change regardless of the mode of operation.

Sebi has also introduced measures to encourage investors who have not provided nominations. Depository participants and mutual fund registrars will be required to send biannual SMS and email reminders to investors who have neither nominated a beneficiary nor formally opted out.

In addition, online platforms will have to display pop-up messages highlighting the benefits of nomination whenever such investors log in to their accounts. The regulator said these nudges are intended to reduce the risk of securities and mutual fund units remaining unclaimed after the death of an investor.

Sebi also wants greater transparency in account statements. Going forward, account and holding statements will either display the names of nominees or indicate whether a nomination exists, depending on the investor’s preference.

The market regulator has repeatedly expressed concerns over growing unclaimed financial assets and has been encouraging investors to update nominations across investment products.

Under existing rules, securities that remain unclaimed for prolonged periods can eventually be transferred to the Investor Education and Protection Fund Authority (IEPF) under applicable regulations.

Sebi said the revised norms supersede all previous circulars relating to nominations for demat accounts and mutual fund folios. The new framework will come into effect from September 1, 2026, giving market intermediaries time to upgrade their systems and implement the revised procedures.

The changes are expected to make account opening and nomination management easier while ensuring smoother transmission of securities and mutual fund holdings to legal heirs and nominees.