Sebi junks rule to freeze demat a/cs, MF folio rule for non-submission of nomination

NewsDrum Desk
New Update

New Delhi, Jun 10 (PTI) Capital markets regulator Sebi on Monday eased rules for existing investors with abolishing the norm of freezing demat accounts and mutual fund folios in case of failure to provide a 'choice of nomination'.

Additionally, investors holding securities in physical form would be eligible for receipt of any payment, including dividend, interest or redemption payment as well as to lodge grievances or avail any service request from the RTA (Registrars to an Issue and Share Transfer Agents) even if they did not submit 'choice of nomination'.

Earlier, the regulator set June 30, 2024, as the deadline for all existing individual mutual fund holders to nominate or opt out of nomination. Failure to comply with the rule could have led to the freezing of their accounts for withdrawals.

Based on representations received from the market participants, for ease of compliance and investor convenience, Sebi has decided that for existing investors or unitholders, non-submission of 'choice of nomination' will not result in the freezing of demat accounts as well as mutual fund folios, according to a circular on Monday.

The regulator said that payments withheld presently by the listed companies or RTAs for not submitting a 'choice of nomination' will be processed accordingly.

Sebi further said that all new investors/unitholders would continue to be required to mandatorily provide the 'choice of nomination' for demat accounts/ mutual fund folios (except for jointly held demat accounts and mutual fund folios).

The regulator has asked depository participants, AMCs or RTAs to encourage the demat account holders or mutual fund unitholders, respectively, to update 'choice of nomination' by sending a communication on a fortnightly basis by way of emails and SMS to all such investors, who have not provided the 'choice of nomination'.

The communication should provide guidance for Demat account holders/ mutual fund unit holders to provide a 'choice of nomination'.

To encourage the existing investors to provide a 'choice of nomination', a pop-up would be provided on the web or mobile platform to the investors by depositories and depository participants while logging into the demat account and by AMCs while logging into their MF account from October 1.

Also, the regulator has provided a format for providing nomination and opting-out of nomination both in the case of demat account and MF folios. It said that only three fields need to be provided mandatorily for updating nomination details -- name of the nominee, share of the nominee and relationship with the applicant. PTI SP SP SHW