The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing significant modifications to the nomination norms for demat accounts and mutual fund (MF) folios. The proposals aim to enhance investor on-boarding and simplify the transition of assets by aligning securities market rules with existing banking norms. A key shift includes making nomination the default choice for all new single accounts, while reducing the maximum number of nominees from 10 to 4. These changes are supported by the goal of reducing the volume of unclaimed assets and ensuring a smoother transmission process for legal heirs through digital and physical verification methods. Public comments are invited until April 7, 2026.
Key Proposals for Modified Nomination Norms
Default Status: Nomination will be the default requirement for new single accounts/folios; joint holders may opt for nomination collectively.
Nominee Limit Realignment: The maximum number of nominees is proposed to be reduced to 4, matching standard banking practices.
Simplified Data Requirements: Mandatory details are restricted to the nominee’s name and relationship (and DOB for minors), while addresses and KYC details remain optional.
Flexible Division of Assets: If an investor does not specify a percentage share for multiple nominees, the assets will be divided equally by default.
Digital Authentication: Nominations can be processed via Aadhaar-based e-sign or two-factor authentication, while offline modes continue to support wet signatures or thumb impressions.
Incentivising Protection: Investors wishing to "opt-out" must review a mandatory pop-up message explaining the risks of having no nominee and the potential for assets to be transferred to the Investor Education and Protection Fund Authority (IEPF).
What is the "Opt-Out" Declaration? The opt-out declaration is a formal confirmation by an investor that they voluntarily choose not to appoint a nominee for their securities. This decision plays a role in increasing the administrative burden on legal heirs later, as the lack of a nominee often requires additional court-issued documents for asset transmission. To ensure informed decision-making, SEBI's proposed framework is supported by a requirement for regulated entities to display a pop-up warning. This warning clarifies that without a nominee, prolonged unclaimed holdings may eventually be treated as unclaimed assets and transferred to the Investor Education and Protection Fund (IEPF) Authority.
Impact on the Common Man: What This Means for You
Easier Account Opening: The move to default nomination and reduced data requirements reflects growth inmaking the entry into the stock market or mutual funds faster and less paper-intensive.
Faster Asset Transmission: By aligning with banking norms, the transition of your investments to your family after your demise becomes a more supported and consistent process across all financial sectors.
Protection of Wealth: Mandatory monthly reminders for accounts without nominations play a role in ensuring that your hard-earned savings do not end up in the "unclaimed" category with the IEPF.
Digital Convenience: The ability to add, change, or cancel nominees anytime through mobile-based OTP or e-sign contributes to greater control over your financial legacy without needing physical visits.
Policy Relevance: Streamlining the Indian Securities Ecosystem
Operationalising Banking Alignment: Synchronizing SEBI norms with banking rules reflects growth in a unified national financial regulatory framework, reducing confusion for multi-asset investors.
Internalising Investor Education: Mandating pop-up messages and regular reminders plays a role inproactively reducing the build-up of unclaimed dividends and shares in the IEPF.
Bypassing Power of Attorney Risks: Clarifying that POA holders cannot nominate on behalf of investors is a foundational step for contributing to the protection of investor intent and preventing unauthorized asset transfers.
Strengthening Trustee Rights: Reaffirming that nominees act as trustees for legal heirs is supported by the legal need to ensure that the immediate transfer of assets does not override the rights of the actual inheritors.
Follow the Full Consultation Paper Here: Consultation Paper on Modified Norms for Nomination in Demat Accounts and MF Folios
