SEBI’s New Nomination Rules for Demat & Mutual Funds

The Securities and Exchange Board of India (SEBI) has revised its nomination framework, permitting investors to designate up to three nominees for single-holder demat accounts and mutual fund folios. This new regulation, which takes effect on September 1, 2026, allows for precise percentage-based asset distribution.

Understanding the New Nomination Flexibility

Under the updated guidelines, investors can specify the exact percentage share each nominee will receive, ensuring their assets are distributed according to their wishes. If no specific percentages are provided by the investor, the assets will be divided equally among all listed nominees.

For instance, an investor might allocate holdings in a 50:30:20 ratio among three family members. If two nominees are appointed without specified shares, each would receive 50% of the assets. Similarly, if three nominees are designated without percentages, each would receive one-third of the holdings.

In situations involving odd lots or fractional balances of securities or units, any remaining portions will be transferred to the first nominee listed by the investor. This ensures that even small residual amounts are appropriately accounted for in the distribution process.

Mandatory Requirements for New Accounts

The new SEBI rules stipulate that investors cannot leave the nomination field blank when opening a new single-holder demat account or registering an eligible mutual fund folio. Investors are now required to either provide complete nominee details or submit a signed declaration formally opting out of the nomination process.

For accounts held jointly, the nomination process remains optional for the holders. Any subsequent changes to nominee details in jointly held accounts will necessitate the explicit consent of all joint holders involved.

Review and Succession Considerations

SEBI advises investors to periodically review and update their nominee details, particularly following significant life events. Such events include marriage, divorce, the unfortunate death of an existing nominee, or the birth of a child, ensuring records remain current.

While nomination streamlines the transmission of investments after an investor’s death, it is crucial to understand that a nominee does not automatically become the legal owner of the assets. Succession rights involve separate legal considerations that extend beyond the nomination process itself.