Mutual fund investors in India can now name up to 10 nominees

Market regulator Securities and Exchange Board of India (Sebi) has announced significant changes to the nomination rules for mutual funds and demat accounts aimed at reducing unclaimed assets and ensuring better management of investments, particularly in cases of illness or the death of an investor. 

Sebi has revises mutual fund nomination rules, effective March 1, 2025. Sebi said that an investor can declare up to 10 persons as nominees in the demat account or mutual fund folio. However, the investor will need to declare the nominee. It cannot be done by the Power of Attorney (PoA) holder(s) of the investor. The nominees can either continue as joint holders with other nominees or open separate single accounts/folios for their respective portions. 

What are the documents required for the transfer of assets to nominees after the death of the investor?

The following documents and details will be required for the transfer of assets to the registered nominees.

 

• Self-attested copy of the death certificate of the deceased investor
• Due completion, updating, or reaffirming of the KYC of the nominee(s)
• Due discharge from the creditors

   

Key Changes 

Under the new guidelines, investors are now required to provide comprehensive information about their nominees. This includes essential identification details, such as the nominee's Permanent Account Number (PAN), driving license number, or the last four digits of their Aadhaar number. Additionally, investors must specify the nominee’s contact details and their relationship to the investor.

 

Investors can now nominate up to 10 individuals in a mutual fund account, enhancing flexibility in asset allocation among family members or close associates.  Sebi also stated that upon transmission of a joint account or folio, the nominees shall have the option to either continue as joint holders with the other nominees or open individual accounts or folios for their respective portions. 

 

In the event of an investor's death, Sebi has streamlined the process for transmitting assets to the registered nominee. Only two documents are required: a self-attested copy of the death certificate and the completion or updating of the nominee's KYC (Know Your Customer) details.

 

Enhanced Submission Options

Sebi has mandated that regulated entities—such as mutual fund houses and depositories—offer investors the option to submit nomination forms both online and offline. For online submissions, these entities will validate nominations through digital signature certificates or Aadhaar-based electronic signatures. Furthermore, investors will receive an acknowledgment for every nomination submission, ensuring transparency throughout the process. Regulated entities must maintain records of nominations and acknowledgments for eight years following the transmission of the account or folio.

 

Special Provisions for Incapacitated Investors

Recognizing the unique challenges faced by incapacitated investors, the new rules empower any one of the nominees to operate the investor's folio. This includes specifying the percentage or absolute value of assets in the account that can be encashed, and the ability to change these mandates as needed.

 

To ensure the integrity of this process, asset management companies (AMCs) are required to conduct an in-person verification of the incapacitated investor’s approval, using a thumbprint or mark witnessed independently. Importantly, any funds withdrawn must be transferred only to the investor's registered bank account, with no changes permitted to contact details or linked accounts.

 

Sebi has also tasked depositories and the Association of Mutual Funds in India (AMFI) with developing a standard operating procedure (SOP) to further support incapacitated investors.