SEBI’s New Rule For Mutual Fund: Allowed Nomination of Upto 10 Members

The Securities and Exchange Board of India (SEBI) has introduced significant changes to the nomination rules for mutual funds and demat accounts to reduce unclaimed assets and improve the management of investments, particularly in cases of illness or the death of an investor.

Updated Mutual Fund Nomination Rules (Effective March 1, 2025)

SEBI now allows investors to nominate up to 10 individuals for their demat account or mutual fund folio. However, nominations must be made directly by the investor and cannot be done by the Power of Attorney (PoA) holder. These nominees can either hold the assets jointly or open separate accounts/folios for their share.

Required Documents for Asset Transfer After an Investor’s Death

To transfer assets to the registered nominees after the investor’s death, the following documents and procedures are required:

1. A self-attested copy of the death certificate of the deceased investor.
2. Completion, updating, or reaffirmation of the KYC details of the nominee(s).
3. A discharge from any creditors, if applicable.

Key Changes Under the New Guidelines

The updated rules require investors to provide more detailed information about their nominees. This includes essential identification details such as the nominee’s PAN, driving license number, or the last four digits of their Aadhaar number, along with their contact information and relationship to the investor.

Investors can now nominate up to 10 individuals in their mutual fund account, offering greater flexibility for asset distribution among family members or close associates. In cases of joint accounts or folios, the nominees will have the option to either remain joint holders with other nominees or open individual accounts for their respective shares.

In the event of the investor’s death, SEBI has streamlined the asset transmission process. Only two documents are required: a self-attested copy of the death certificate and updated KYC details for the nominee(s).

Enhanced Submission Options

SEBI has mandated that mutual fund houses and depositories offer both online and offline options for submitting nomination forms. For online submissions, entities will validate the nomination using digital signature certificates or Aadhaar-based electronic signatures. Investors will receive an acknowledgement for each nomination submission, ensuring transparency. These entities must retain records of nominations and acknowledgements for eight years after asset transmission.

Provisions for Incapacitated Investors

Recognising the challenges faced by incapacitated investors, the new rules empower one of the nominees to operate the investor’s folio. This includes specifying the percentage or value of assets to be encashed and the ability to modify these mandates as needed.

To maintain the integrity of this process, asset management companies (AMCs) are required to verify the approval of the incapacitated investor in person, using a thumbprint or mark witnessed independently. Any funds withdrawn must be transferred only to the investor’s registered bank account, with no changes allowed to contact details or linked accounts.

Furthermore, SEBI has tasked depositories and the Association of Mutual Funds in India (AMFI) to develop a standard operating procedure (SOP) to assist incapacitated investors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their research and assessments to form an independent opinion about investment decisions.

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