The Securities and Exchange Board of India (SEBI) on Tuesday proposed changes to simplify nomination norms for demat accounts and mutual fund folios, aiming to reduce onboarding friction and improve compliance.
The regulator has suggested making nomination the default option for new accounts, with investors required to explicitly opt out if they do not wish to appoint a nominee. The move is part of a broader effort to streamline processes following operational challenges flagged by market participants under the current framework.
It has proposed limiting mandatory nominee details to just the name and relationship with the investor. Other information, including contact details and percentage share, will be optional. “Feedback was received from the industry that the process of furnishing so many details of the nominee is onerous for investors and as a result many investors are dropping off, on-boarding,” SEBI said.
If the share of nominees is not specified, assets will be divided equally among them.
Cap on nominees
The regulator has also proposed capping the number of nominees at four, replacing the earlier proposal to allow up to 10, citing operational constraints and low usage of multiple nominees.
It has been suggested that provisions allowing nominees to operate accounts in the event of an investor’s incapacitation be removed. Instead, it has proposed continuing with the existing power of attorney route.
“Conventionally, a nominee becomes trustee of the assets only upon the demise of the investor… a nominee coming to the fore even when the investor is alive, causes confusion,” it said.
The proposals also include nudges such as periodic reminders to investors without nominations, as well as pop-up prompts highlighting the benefits of nomination. Public comments on the proposals are open till April 7.
SEBI said the changes are aimed at aligning nomination practices with banking norms, reducing the compliance burden, and preventing the build-up of unclaimed assets.