MF unitholders will have choice of providing nomination or opting out

New rule will be applicable for investors subscribing to MFs on or after August 1.

Providing an informal guidance in this regard to Ace Lansdowne Investments Services LLP, which manages Sebi-registered AIF -- Ace Lansdowne India Investment Fund-- Sebi indicated that its views might be different for different conditions.
Securities and Exchange Board of India

The Securities and Exchange Board of India (Sebi) on Wednesday said mutual fund unitholders will have an option to either provide nomination or to opt out of nomination through a signed declaration form. Sebi said the new rule will be applicable for investors subscribing to mutual fund units on or after August 1, 2022.

Further, all asset management companies have been advised to set the deadline for this as March 31, 2023, for nomination/opting out of nomination for all the existing individual unitholders holding mutual fund units either solely or jointly, failing which the folios shall be frozen for debits, Sebi said in a circular on Wednesday.

Both the nomination form and declaration form for opting out of nomination should be available both physically and digitally, according to the choice of unitholders. In case of physical option, forms shall carry the wet signature of all unitholders. In case of digital, forms shall be using the e-Sign facility, the regulator said.

“All AMCs shall ensure that adequate systems are in place for providing the e-Sign facility and take all necessary steps to maintain confidentiality and safety of client records,” Sebi said.

Prior to the circular issued on Wednesday, nominations for mutual fund unitholders were mandatory to start new investments. The move is aimed at bringing uniformity in practices across all constituents in the securities market. In 2021, the regulator had given a similar choice for investors who were opening new trading and demat accounts.

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