Find Out SEBI’s New Deadline for Furnishing Mutual Fund Nomination Details

Details about the deadline extension by SEBI for mutual fund nomination

Mutual Fund Nomination Details

The Securities and Exchange Board of India (SEBI) had mandated that all investors must furnish nominations for their mutual fund investments. The original date stipulated for the same was 31 March 2023, which has now been extended to 30 September 2023. 

Mandate Details

Earlier in June 2022, SEBI had mandated that all existing mutual fund holders must provide nominee details or opt out of nominees, where units are held solely or jointly. Unitholders who fail to do so will have their folios frozen for debits. 

The regulator has instructed Asset Management Companies (AMC) and Registrar and Transfer Agents (RTA) to guide their unitholders in fulfilling this nomination/opt-out requirement. All AMCs and RTAs must send fortnightly reminder emails and text messages to the mutual fund investors until this requirement is met.

Also Read: Debt fund taxation rule changes: What expert wealth managers say

Nomination Requirement

SEBI has already defined the format and process for the nomination and opting-out exercises. AMCs have been instructed to provide both offline and online facilities to the unitholders for furnishing nomination details as well as for opting out of the nomination. 

Investors can accordingly select the relevant format for either of the two exercises. They can fill in the form and submit the same to fund houses or RTAs. All mutual fund folios held individually or jointly, which have not fulfilled this requirement, will not be able to sell units from the folio.

Also Read: New guidelines by SEBI – use of e-wallets in MF investing to be KYC compliant

Nomination Facts You Must Know

  • A nominee can be any person, including a minor, but excluding a company, body corporate, partnership, HUF, society, or non-religious and non-charitable trust. For minor nominees, details of the guardian must be provided. An NRI can also be a nominee, subject to rules in force. 
  • Nomination cannot be made by a power of attorney or a guardian investing on behalf of a minor. Transactions made in the minor’s account during the period of minority have to be ratified by the minor upon reaching the age of the majority.
  • The nominees will receive the rights in the units only in the event of the death of all the unitholders. Even then, he or she doesn’t acquire the title or beneficial interest in the units. Instead, the nominee must act as the agent and trustee of the legal heirs.
  • Nomination can be cancelled only by the unitholders on their own account, either jointly or singly, and he or she must be the person who made the original nomination. Once the nomination is cancelled, the fund house is under no obligation to effect any transfer in favour of the erstwhile nominees. 
  • Nominations automatically become null and void in the event of a redemption of the units.

Also Read: Constant vs target maturity funds: Know which mutual fund is a better bet for you

The SEBI requirement notwithstanding, a nomination is something necessary for all mutual fund unitholders. While units of a deceased unitholder pass on to legal heirs, implementing succession can be an expensive and lengthy exercise. Nomination simplifies the succession and unit transfer process while making it less expensive. With that in mind, don’t forget to nominate or opt-out before SEBI’s revised due date.

Source:

  • https://www.amfiindia.com
  • https://www.moneycontrol.com

The Securities and Exchange Board of India (SEBI) had mandated that all investors must furnish nominations for their mutual fund investments. The original date stipulated for the same was 31 March 2023, which has now been extended to 30 September 2023. 

Mandate Details

Earlier in June 2022, SEBI had mandated that all existing mutual fund holders must provide nominee details or opt out of nominees, where units are held solely or jointly. Unitholders who fail to do so will have their folios frozen for debits. 

The regulator has instructed Asset Management Companies (AMC) and Registrar and Transfer Agents (RTA) to guide their unitholders in fulfilling this nomination/opt-out requirement. All AMCs and RTAs must send fortnightly reminder emails and text messages to the mutual fund investors until this requirement is met.

Also Read: Debt fund taxation rule changes: What expert wealth managers say

Nomination Requirement

SEBI has already defined the format and process for the nomination and opting-out exercises. AMCs have been instructed to provide both offline and online facilities to the unitholders for furnishing nomination details as well as for opting out of the nomination. 

Investors can accordingly select the relevant format for either of the two exercises. They can fill in the form and submit the same to fund houses or RTAs. All mutual fund folios held individually or jointly, which have not fulfilled this requirement, will not be able to sell units from the folio.

Also Read: New guidelines by SEBI – use of e-wallets in MF investing to be KYC compliant

Nomination Facts You Must Know

  • A nominee can be any person, including a minor, but excluding a company, body corporate, partnership, HUF, society, or non-religious and non-charitable trust. For minor nominees, details of the guardian must be provided. An NRI can also be a nominee, subject to rules in force. 
  • Nomination cannot be made by a power of attorney or a guardian investing on behalf of a minor. Transactions made in the minor’s account during the period of minority have to be ratified by the minor upon reaching the age of the majority.
  • The nominees will receive the rights in the units only in the event of the death of all the unitholders. Even then, he or she doesn’t acquire the title or beneficial interest in the units. Instead, the nominee must act as the agent and trustee of the legal heirs.
  • Nomination can be cancelled only by the unitholders on their own account, either jointly or singly, and he or she must be the person who made the original nomination. Once the nomination is cancelled, the fund house is under no obligation to effect any transfer in favour of the erstwhile nominees. 
  • Nominations automatically become null and void in the event of a redemption of the units.

Also Read: Constant vs target maturity funds: Know which mutual fund is a better bet for you

The SEBI requirement notwithstanding, a nomination is something necessary for all mutual fund unitholders. While units of a deceased unitholder pass on to legal heirs, implementing succession can be an expensive and lengthy exercise. Nomination simplifies the succession and unit transfer process while making it less expensive. With that in mind, don’t forget to nominate or opt-out before SEBI’s revised due date.

Source:

  • https://www.amfiindia.com
  • https://www.moneycontrol.com

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