SEBI extends deadline for implementation of nomination framework in securities market

New Delhi: Markets regulator Securities Exchange Board of India (SEBI) on Wednesday extended the timeline for implementing the second and third phases of its nomination framework in the securities market citing operational challenges faced by depositories and other stakeholders.

In its circular, SEBI said the deadline for Phase II of the implementation, originally scheduled for June 1, has been extended to August 8, while Phase III, earlier set for September 1, has been deferred to December 15.

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The extension followed representations from depositories CDSL and NSDL, as well as industry associations, such as ANMI and CPAI.

These entities highlighted the need for more time to complete the necessary system developments to implement the changes.

In January, SEBI issued guidelines to revamp the nomination process for mutual fund folios and demat accounts to enhance transparency and minimise unclaimed assets in the securities market.

Following representations from various industry bodies, the regulator decided to adopt a phased implementation approach through a subsequent circular in February 2025.

Going by the circular, if one or more joint account holders pass away, the assets will be transferred to the surviving holder(s) without the need for additional KYC unless it was requested earlier and not provided.

The guidelines addressed to entities like AMCs, depositories, and other market participants by introducing significant changes to the rule of survivorship, mandatory nomination for single holdings, and enhanced safeguards for authenticity.

Under the rule of survivorship, assets in joint accounts will be transferred to surviving holders without affecting prior nominations or operational modes.

Further, the markets watchdog also introduced robust measures to verify and validate nominations.

SEBI highlighted new rules to will allow investors to nominate up to 10 persons in the account/folio, with an option to specify percentage allocations for each.

In the absence of any such specification, the assets will be equally distributed among all the nominees. In case of the demise of the investor and any one of the nominees, the regulated entities will distribute the assets on a pro rata basis to the remaining nominees.

The markets watchdog clarified that nominees will receive the assets as trustees on behalf of the legal heirs of the account holder, with no direct inheritance rights for the heirs of a predeceased nominee.

One of the key features of the revamped system is the inclusion of digital and physical channels for submitting or updating nominations.

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