When it comes to financial assets and physical assets, having a nomination is ideal. It ensures that your hard-earned savings and investments are passed on to your loved ones when you cross the styx.

The last date for adding nomination to your demat account and mutual fund folios is June 30, 2024, as per the Securities and Exchange Board of India (SEBI) circular, dated December 27, 2023. For ease of compliance and investor convenience, SEBI revised the deadline multiple times (from March 2023 earlier, then September 2023, later to December 2023, and now to June 30, 2024).

The SEBI notification states that investors must either choose a nominee/s or explicitly opt out of the nomination by submitting a declaration (in the prescribed format) before the set deadline, thus providing the investor the ‘choice of nomination’.

What If You Do Not Opt for Nomination?

Well, the earlier December 2023, circular of SEBI stated that the demat accounts and mutual fund folios shall be frozen for debits.

Now, in its latest circular dated June 10, 2024, the capital market regulator to facilitate ease of doing investments, has done away with the freezing of demat accounts and mutual fund folios of existing investors. The SEBI circular states:

Non-submission of 'choice of nomination' shall not result in freezing of Demat Accounts as well as Mutual Fund Folios.

Further, if you, the investor, hold securities in a physical form and ‘choice of nomination’ is not submitted, according to the SEBI circular, you shall be eligible for receipt of any payment, including dividends, interest, or redemption as well as lodge grievances or avail services from the Registrar & Transfer Agents (RTAs).

If the payment of dividend, interest and/or redemption is withheld presently by the company/RTA only for the want of ‘choice of nomination’ they are directed to process them.

These revisions are done based on the representations received from the market participants for ease of compliance and investor convenience.

That being said, the SEBI circular has made it clear that all new investors/unitholders shall be required to mandatorily provide the ‘Choice of Nomination’ for demat accounts and/or mutual Folios (except for jointly held demat accounts and mutual fund folios).

The format of nomination and declaration to opt-out of nomination, both for demat account and mutual fund folios, are prescribed by SEBI.

To encourage investors to update their ‘choice of nomination’, i.e. to opt in or opt-out, SEBI circular states that depository participants/brokers and in the case of mutual fund folio, the AMCs and RTAs, must send communications (vide email and SMS) guiding them on how to go about.

Moreover, to make the ‘choice of nomination’ apparent to investors who haven’t provided their ‘choice of nomination’, the SEBI circular states that the web/mobile application/platform of the depository participant, AMCs, RTAs, and other platforms providing online transaction execution services must have a pop-up (from October 1, 2024) making it apparent while logging into the demat account or mutual fund account.

The Benefit of Opting for Nomination

Opting in for nomination is in your, the investor’s interest for the smooth transmission of your assets and prevents unclaimed assets.

[Read: How to Go About Transmission of Mutual Fund Units In the Event of Death]

Having a nominee ensures that your financial assets are inherited by your loved one without legal hassles for them later. Without a nomination, your assets may become part of an intestate succession, leading to legal disputes among your heirs.

Knowing that your loved ones are financially secure in case of your unfortunate demise provides peace of mind. Watch this video:

Weighing the benefits of nomination, SEBI, in February 2024, released a consultation paper to revise and revamp nomination facilities in the Indian securities market, seeking public comments. This was done given the increase in unclaimed financial assets due to incomplete nominations and/or unavailability of nominations in the securities markets.

[Read: How SEBI Consultation Paper on Nomination Benefits Investors]

The objective of the consultation paper was to provide convenience to investors and institutions as regards the uniformity in the facilities and procedures for the transmission of financial assets and affording certain choices and flexibilities in nomination facilities.

The capital market regulator plans to make operational the revised and revamped nomination without affecting the prevalent systems of law governing transmission and succession.

Say, today you opt-in for nomination and later wish to have multiple nominees and specify their percentage share in the financial assets, it can be done at your, the investor’s discretion any time (by following the due process), and as per the regulatory guidelines you will receive an acknowledgement of the same.

The regulator has also proposed that in case the investor is permanently or temporarily incapacitated, the nominee/s can conduct the transaction (by following the requisite procedure). If it is a single nominee, such a nominee would be authorised to conduct the transaction. However, if there are multiple nominees, you, the investor, would need to specify which nominee will be authorised to conduct transactions.

With respect to nomination, also keep in mind that if the nominee passes away during the lifetime of the investor, the legal heir/s or legal representative/s of such deceased nominee, are not entitled to any right, title or any interest in the financial assets of the investor upon the investor’s death solely by virtue of nomination.

So, do make it a point to have a nomination for all your financial and other assets. Be a thoughtful investor.

Happy Investing!

This article first appeared on PersonalFN here

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