SEBI revises Nomination Framework for demat accounts and mutual fund folios
Introduction
The Securities and Exchange Board of India (“SEBI“), through its circular dated 29 May 2026 (“Circular“), has introduced significant revisions to the nomination framework applicable to demat accounts and mutual fund folios. The amendments are aimed at simplifying investor onboarding, facilitating ease of investment and reducing the incidence of unclaimed financial assets through a more streamlined and accessible nomination process.
The revised framework will come into effect from 1 September 2026.
Background
SEBI had previously overhauled the nomination regime through its circular dated 10 January 2025 with the objective of strengthening succession planning and ensuring smoother transmission of securities and mutual fund holdings. Following implementation, various stakeholders highlighted operational and procedural challenges associated with the revised requirements.
Pursuant to industry representations and feedback received during the public consultation process, SEBI has now recalibrated the framework to simplify compliance requirements while continuing to promote investor protection and efficient transmission of assets.
Key Changes:
1. Nomination Becomes the Default Option
For all new single-holder demat accounts and mutual fund folios opened on or after 1 September 2026, investors will be required to either provide nomination details or expressly opt out through the prescribed declaration.
2. Nomination Remains Optional for Joint Accounts
Jointly held demat accounts and mutual fund folios are not subject to the mandatory nomination requirement. However, any nomination, modification or cancellation of nomination will require the consent of all joint holders.
3. Up to Three Nominees Permitted
Investors may nominate up to three individuals. Where the percentage allocation among nominees is not specified, the holdings will be distributed equally among the nominees.
4. Simplified Information Requirements
The Circular significantly reduces the information required for nomination. Only the nominee’s name and relationship with the investor are mandatory, while details such as contact information, identification particulars, guardian details and percentage allocation are optional.
5. Streamlined Online and Offline Nomination Process
Investors may submit nominations electronically through Digital Signature Certificates, Aadhaar-based e-sign facilities, other recognised e-sign mechanisms or OTP-based two-factor authentication. For physical submissions, witness signatures are no longer required unless the investor affixes a thumb impression.
6. Flexibility to Modify
Investors may add, modify or cancel nominations at any time without limitation. Regulated entities are required to provide acknowledgements for every nomination-related request.
7. Enhanced Investor Awareness Measures
Depository Participants and Mutual Fund Registrars and Transfer Agents are required to periodically remind investors who have not registered nominations through emails, SMS communications and platform-based notifications.
Key Takeaways:
For Investors
The revised framework significantly simplifies the nomination process by reducing documentation requirements and enabling multiple digital authentication methods. The changes are expected to encourage greater adoption of nominations and facilitate smoother transmission of securities and mutual fund investments to nominees and legal heirs.
For Market Intermediaries
Asset Management Companies, Depositories, Depository Participants and Registrars and Transfer Agents will need to review and update their onboarding documentation, nomination forms, investor interfaces and operational processes before the implementation date. Additional obligations relating to investor communication and awareness will also need to be incorporated into existing compliance frameworks.
Conclusion:
The Circular represents a pragmatic refinement of SEBI’s nomination framework. By reducing procedural barriers, simplifying information requirements and expanding digital authentication options, SEBI has sought to strike a balance between investor convenience and effective succession planning. The amendments are expected to improve the overall investor experience while supporting the regulator’s objective of reducing unclaimed assets within the securities market ecosystem.