SEBI’s New Nomination Rules: Digital Opt-Out, Flexible Changes & Faster Transfers For Demat & Mutual Funds

The Securities and Exchange Board of India (SEBI) has introduced new regulations aimed at streamlining the nomination process in the Indian securities market. These changes are designed to provide investors with greater flexibility, faster asset transfers, and enhanced security in managing their demat and mutual fund (MF) accounts.

SEBI’s latest circular allows investors with single-holding accounts to opt out of nomination either online or offline. This move simplifies the process and offers greater convenience to investors.

Digital Opt-Out for Nomination

For demat accounts, Depository Participants (DPs)—rather than Depositories—will handle the online opt-out process for both existing and new investors. This adjustment ensures a more streamlined and secure process, reducing unnecessary paperwork and delays.

Unlimited Nominee Changes for Investors

One of the most significant changes in SEBI’s new framework is the ability for account holders to modify their nominees an unlimited number of times. This flexibility enables investors to update their nominations as per their changing life circumstances, ensuring that asset allocation remains aligned with their preferences.

Phased Implementation Timeline

Securities and Exchange Board of India (SEBI) will roll out these changes in a phased manner starting from March 1, 2025, and the process will be fully implemented by September 2025. This gradual rollout allows financial institutions and investors to adapt to the new rules smoothly.

SEBI New Rules for Transmission of Assets

SEBI has also introduced key changes in the transmission process, ensuring faster and hassle-free asset transfers in the event of the death of a joint account holder.

Simplified Asset Transfers for Joint Holders

If a joint account holder passes away, the assets will be transferred to the surviving joint holders without requiring fresh Know Your Customer (KYC) verification. However, for the process to be completed, existing KYC details must be updated.

Updating Key Details During Transmission

Surviving holders will now have the flexibility to update essential details during the transmission process, including:

• Address

• Mobile number

• Email ID

• Bank account details

Authorization for Physically Incapacitated Investors

A crucial addition to SEBI’s framework is the ability for investors to authorize a nominee to operate their account if they are physically incapacitated but still retain legal decision-making capacity. This ensures that investments remain active and properly managed, even if an account holder is unable to operate their account personally.

New Requirements for Demat and Mutual Fund (MF) Accounts

To further enhance transparency and efficiency, SEBI has mandated that nomination forms must specify the percentage allocation designated to each nominee.

Nomination Percentage Allocation

• If the allocation results in an odd percentage, the remaining portion will be assigned to the first nominee.

• SEBI’s circular states: “Any odd lot after division / fraction of %, shall be transferred to the first nominee mentioned in the nomination form.”

Conclusion

SEBI's new nomination rules mark a significant step towards simplifying and modernizing the securities market, offering investors greater flexibility and security. By allowing digital opt-outs, unlimited nominee changes, and seamless asset transmission, SEBI has addressed long-standing concerns about cumbersome processes and delays. The shift towards Depository Participants (DPs) handling online opt-outs for demat accounts further streamlines the investor experience.

Moreover, the new transmission rules ensure that assets are swiftly transferred to surviving joint holders without unnecessary KYC formalities, making the process more investor-friendly. The provision allowing nominees to operate accounts in cases of physical incapacitation also adds an essential layer of financial security.

With these changes being implemented in phases until September 2025, investors should take proactive steps to update their nominations and ensure compliance. As SEBI continues to enhance transparency and efficiency, these reforms will contribute to a more robust and investor-centric securities ecosystem.