Revise and Revamp Nomination Facilities in the Indian Securities Market
Summary
This circular revises nomination norms for demat accounts and mutual fund folios to prevent unclaimed assets in the Indian securities market. It establishes the rule of survivorship for joint holders and outlines transmission procedures for simultaneous deaths or HUF Karta succession. The document mandates specific verification guardrails, record-keeping periods, and disclosure requirements for regulated entities regarding nominations. This section outlines optional provisions for guardians and KYC updates, while mandating specific personal identifiers for nominees. It establishes procedures for handling incapacitated investors through designated nominees and regulated entity officers. Finally, it details the streamlined transmission process to nominees and legal heirs, limiting documentation requirements. The document mandates that Asset Management Companies treat unclaimed money in specific folios according to extant norms and flag them for due diligence. It establishes an online mechanism for investors to opt-out of nomination, requiring OTP verification and either physical declaration or video recording. The circular introduces a standardized Nomination Form in Annexure A, sets
Text
In case of joint accounts / holdings, upon demise of one or more joint holder(s), the regulated entity shall transmit the assets held to the surviving holder(s) vide name deletion. The surviving member(s) shall receive the assets as owner(s) and not as a trustee. Surviving joint holders shall be entitled to continue with, or change or cancel the nominations made previously. The mode of operation (of the joint account), namely that of the first named holder OR anyone or survivor OR either or survivor basis OR joint, etc. shall be unaffected by the rule of survivorship. The norms applicable for operation of the account / folio shall be mutatis mutandis applicable for nomination.
In case of joint accounts when all joint holders simultaneously pass away, the regulated entity shall transmit the assets in the account / folio to the registered nominee(s) for effecting its due discharge. In absence of nomination, the regulated entity shall transmit the assets in the account / folio to either; the legal heir(s) or legal representative(s) of the youngest of the joint holders as per the rules of intestate succession or as per the Will of the latter, as the case may be, after following the prescribed procedure.
In case of accounts / folio held by Hindu Undivided Family (HUF), upon the death of the Karta as recorded, the new Karta as constituted under applicable law, would be entitled to operate such an account/folio. In the absence of new Karta, the regulated entity shall effect transmission of account / folio as per dissolution deed and other criteria defined by the respective SRO / industry body in consultation with the SEBI.
The nominees(s) shall receive the assets of deceased sole account / sole holder(s) as trustee on behalf of legal heir(s) of deceased holder(s) thereby effecting due discharge of concerned regulated entity.
Legal heir(s) of nominee shall not be eligible to inherit the assets of the investor, if the nominee predeceases the investor.
Upon demise of one of the nominees prior to the demise of the investor and if no change is made in the nomination, then the assets shall be distributed to the surviving nominees on pro rata basis upon demise of the investor.
In case of any subsisting credit facilities secured by a duly created pledge, the regulated entity shall obtain due discharge from the creditors prior to transmission of assets to the nominee(s) or legal heir/s / legal representative/s, as the case may be.
Nomination shall be mandatory for single holding only. The requirement of nomination shall be optional for jointly held accounts / folios.
The regulated entities shall provide option to the investor to submit nomination form either online or through physical / offline mode with the following guardrails.
Online nomination: the regulated entities shall validate the nomination through: a) digital signature certificate or b) aadhaar based e-sign or by using any other e-sign facility recognized under Information Technology Act, 2000; or c) two factor authentication (2FA) in which one of the factors shall be a One-Time Password sent to the registered mobile number and email address of the investor.
Physical / offline nomination: The regulated entity shall verify the signature(s) as per the mode of holding, while registering or changing nomination. Where an investor affixes his/her thumb impression on the nomination form, then the same shall be witnessed by two persons and details of such witnesses shall be duly captured in the nomination form. However, there shall be no such requirement of witnesses in case of nomination forms carrying wet / digital / e-sign signature of the investor.
Regulated entities shall provide acknowledgement to the investor for each and every instance, irrespective of the mode of nomination. They shall maintain physical or electronic records, as the case may be, of the nomination, its acknowledgement etc. for a period of eight years after transmission of the folio/ account.
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Source: SecMarx — Revise and Revamp Nomination Facilities in the Indian Securities Market. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.