SEBI Extends Nomination Deadline Beyond Dec 31 for Mutual Funds and Demat Accounts

In a move to assist investors in safeguarding their assets and facilitating a smoother transfer to legal heirs, the Securities and Exchange Board of India (SEBI) has announced an extension of the deadline for demat and mutual fund account holders to provide nominations. The new deadline is now set for June 30, 2024, as opposed to the previous deadline of December 31, 2023.

SEBI had initially extended the deadline from September 30 to December 31, 2023, and has now granted a further extension to provide ease of compliance and enhance investor convenience. According to a circular issued by SEBI, the extension aims to encourage investors to secure their assets and nominate beneficiaries for their demat accounts and mutual fund folios.

SEBI has urged asset management companies (AMCs), depository participants, and Registrar and Transfer Agents (RTAs) to regularly communicate with demat account holders and mutual fund unit holders. This communication, through emails and SMS on a fortnightly basis, is intended to guide investors who are not yet in compliance with the nomination requirements.

Importance of Nomination

Nomination is a crucial process that ensures a smooth transfer of securities to chosen beneficiaries in the event of the investor's demise. SEBI emphasizes the significance of timely nomination, highlighting that failing to meet the deadline could result in freezing debits from mutual fund holdings, restricting investors from accessing their accounts or making withdrawals.

As of September-end 2023, data from registrar and transfer agent (RTA) CAMS indicated that approximately 25 lakh PAN holders had not updated nominations in their mutual fund folios. This highlights the importance of the extended deadline for those who have not yet completed the nomination process.

SEBI has warned that failing to complete the nomination process may lead to the freezing of debits from holdings. This restriction means investors would be unable to redeem or withdraw funds from their mutual fund folios or use their demat accounts for stock trading.

Final words

Nomination is a critical step in ensuring the smooth transmission of assets to beneficiaries. SEBI's decision to extend the deadline acknowledges the challenges faced by investors and aims to mitigate potential issues associated with frozen accounts and legal complexities for heirs. Investors are encouraged to take advantage of this extended deadline to secure their financial assets for the future.