SEBI Nomination Scheme details for Mutual Fund

In order to bring uniformity in practices across all constituents in securities market, protect the interests of investors in securities and to promote the development of, and to regulate the securities market Securities and Exchange Board of India (SEBI) vide Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 dated 15th June, 2022 has issued notification related to Nomination for Mutual Fund Unit Holder in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with the provision of Regulation 77 of SEBI (Mutual Funds) Regulation, 1996.

Deadline: All the AMCs are advised to set deadline as March 31, 2023 for nomination / opting out of nomination for all the existing individual unit holder(s) holding mutual fund units either solely or jointly as mentioned at para 1 above, failing which the folios shall be frozen for debits.

Key Highlights:

  1. Nomination is a facility that enables a unitholder to nominate a person, who can claim the units held by the investor or the redemption proceeds in case of death of the unitholder. If the units are held jointly by more than one person, all joint unit holders are required to together nominate a person.
  2. Nomination can be made either at the time of initial application for purchase of units or subsequently.
  3. To make a nomination while investing with a mutual fund for the first time, the applicant may fill up the ‘Nomination’ section provided in the account opening application form.
  4. Investors subscribing to mutual fund units on or after August 1, 2022, shall have the choice of:
    1. Providing nomination in the format specified in fourth schedule of SEBI (Mutual Funds) Regulations, 1996 (or)
    1. Opting out of nomination through a signed Declaration form as provided in Annexure – A to this circular.
  5. In case of physical option, the forms shall carry the wet signature of all the unit holder(s) and in case of online option, the forms shall be using e-Sign facility recognized under Information Technology Act, 2000, instead of wet signature(s) of all the unit holder(s).
  6. A guardian investing in mutual fund units on behalf of a minor cannot nominate for the units. According to Sebi, the guardian also cannot be a nominee in the same account, as it shall be the sole discretion of the minor when he/she attains majority.
  7. All AMCs shall ensure that adequate systems are in place for providing the eSign facility and take all necessary steps to maintain confidentiality and safety of client records.

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