Capital markets regulator Sebi on Tuesday extended the deadline till September-end for existing demat account holders and mutual fund investors to provide a choice of nomination or opt out of it.
Earlier, the regulator mandated holders of trading and demat accounts as mutual fund folios to update the details of their nominee by March 31, 2023.
In July 2021, the Securities and Exchange Board of India (Sebi) asked all existing eligible trading and demat account holders to provide a choice of nomination on or before March 31, 2022, failing which the trading and demat accounts would have been frozen for debits. Later, this was extended by one more year till March 31, 2023, and now it has been extended again or six months.
"Based on the assessment of the trading as well as demat accounts in which choice of nomination details (furnishing of nomination or declaration for opting out of nomination) has not been updated and on the basis of representations received from the stakeholders, it has been decided that the provisions... with regard to freezing of accounts shall come into force with effect from September 30, 2023, instead of March 31, 2023," Sebi said in a circular.
In a separate circular, the regulator has given more time till September 30 to existing mutual fund investors to nominate a beneficiary or opt out of it by submitting a declaration form.
If such investors fail to comply with the rules by September 30, their folios will be frozen, and they will not be able to redeem investment.
The regulator, in June 2022, made it mandatory for mutual fund subscribers to submit the nomination details or declaration to opt out of the nomination on or after August 1, 2022. Later, the deadline was extended to October 1, 2022. The deadline for all the existing mutual fund folios, including jointly-held ones, was set as March 31, 2023.
Also, Sebi has asked stock brokers, depository participants and asset management companies to encourage their clients to update their 'choice of nomination' by sending a communication on fortnightly basis by way of emails and SMS to all such demat accounts holders or MF unit holders wherein the 'choice of nomination' is not captured.
The communication would provide guidance through which the client can provide his/her 'choice of nomination'.
Investors who are opening new trading and demat accounts from October 1, 2021, have the choice of providing a nomination or opting out of nomination through a declaration form.
Explaining the rationale behind the Sebi's move, Anand Rathi Wealth Ltd COO Niranjan Babu Ramayanam said that many investment accounts in the past have been opened without nominating anyone to whom the assets should be transmitted in case something happens to the account holders.
This means that the rightful heirs had difficulty in getting the assets transmitted to them due to the hassles of different kinds of documentation requirements.
"Many rightful heirs don't even know about such investments, which are supposed to be claimed by them. Huge investments are lying unclaimed in the investment accounts where the holders are deceased and none of their heirs has claimed for the same. This may lead to miscreants creating fake documents and withdrawing investments that have been lying unattended for a very long time," he added.