SEBI has put out a document for discussion on February 2nd. In it, they are trying to make it simpler for an investor’s financial assets to go to their family if they pass away.
SEBI suggests changing the nomination system for demat accounts and mutual funds.
If the new rules are put in place, nominating someone will be easier. SEBI is asking the public for their thoughts on this document until March 8.
SEBI has given more time for nominating in the past. They are thinking about getting rid of the rule that makes nomination mandatory. Right now, investors must nominate someone or say they don’t want to.
This is a must for joint demat accounts and mutual fund schemes. Some investors haven’t nominated anyone, so SEBI has extended the deadline for them a few times.
A lot of investors don’t like nominating anyone. The last deadline was extended to June 2024.
People with joint accounts have had issues with nominating, especially doing it online. But nominating will still be necessary for single accounts or investments.
SEBI’s data shows that many investors with single mutual fund folios or demat accounts haven’t nominated or have chosen not to.
Not having a nomination causes trouble when transferring assets. Experts say that without a nomination, it’s hard for investors to pass on their financial assets to family after they die.
So, it’s important for investors to use the nomination option and name a family member.
SEBI is acknowledging the traditional ways of transferring assets, like through a will or trust. If these aren’t there, the relevant succession law applies.
SEBI’s stance agrees with a Supreme Court decision in December 2023.
Currently, you can pick up to three nominees for a demat account or mutual fund folio. SEBI’s discussion paper suggests increasing this number to more than ten.
But the purpose of this isn’t clear yet, as having more than one nominee means you have to say the share each nominee gets, making the process complicated.
