Nomination In Demat Account Deadline: Individual demat account holders and mutual fund investors must nominate a beneficiary or choose to opt out by submitting a declaration form before December 31. Failure to do so will result in the freezing of their demat accounts and folios, rendering them unable to redeem their investments.
According to the Securities and Exchange Board of India (SEBI), this mandate applies to both new as well as existing investors.
On March 27, 2023, the market regulator issued a circular, requiring demat account holders to either specify a ‘choice of nomination’ or decline nomination altogether.
SEBI had previously cautioned that demat accounts failing to make a decision would face suspension starting September 30, 2023.
Through a circular dated March 16, 2023, similar directives were issued to holders of physical securities in listed companies. They were required to provide their PAN, nomination, contact details, bank account information, and specimen signature corresponding to their folio numbers.
Under SEBI’s rule, new investors must either nominate their securities or formally opt out of nomination through a declaration form when opening trading and demat accounts.
The move is aimed at helping investors to secure their assets and pass them on to their legal heirs.
For existing investors, including jointly-held mutual fund folios, failing to meet this deadline will result in the freezing of folios for debits. Further, investors’ demat accounts or mutual funds folios will be frozen and inaccessible until they nominate or declare opt-out.
In July 2021, SEBI had asked all existing eligible trading and demat account holders to provide choice of nomination on or before March 31, 2022, failing which the trading and demat accounts would have been frozen for debits.
With regards to mutual fund unitholders, the regulator in its circular on June 15, 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 on multiple occasions.
Based on representations received from the market participants, it was decided that the provision of freezing of folios and demat accounts, will come into force with effect from December 31, 2023.
Market experts are of the view 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.
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