The Securities and Exchange Board of India (SEBI) has highlighted a concerning trend: a significant number of demat accounts, specifically 9.8 crore (72.48%) out of 13.6 crore single-held accounts, lack nomination details. This issue arises amidst a surge in demat account openings, posing risks to many investors. Surprisingly, 69.73% of these accounts have intentionally not made a nomination, while 2.76% remain undecided.
In contrast, mutual fund (MF) folios show better compliance, with only a small percentage neglecting to appoint nominees. However, joint account holders exhibit a similar trend of omitting nominations in both demat accounts and MF folios, with a notable discrepancy in mutual funds where a higher percentage has neither nominated nor opted out.
SEBI points out that this gap may be due to some brokers skipping the nomination step without the account holders’ consent. The regulator had set deadlines for nominations, extending them multiple times, most recently to 30 June 2024, to prevent account deactivation.
Addressing these concerns, SEBI proposes making nominations optional for joint mutual fund and demat accounts in a new consultation paper. For single-holder investments, however, nominations remain mandatory. This adjustment aims to simplify the process, acknowledging the rule of survivorship for joint holdings, where the surviving holders inherit the assets upon one’s death. SEBI is open to feedback on this proposal until March 8, 2024.
This move by SEBI is aimed at easing the nomination process and ensuring that investors, especially those holding joint accounts, face fewer hurdles in managing their investments securely and efficiently.
If you’re an Alice Blue client, adding a nominee is important to ensure your investments are secure. You can easily add your nominee by visiting the Alice Blue Bot website. Adding a nominee ensures that your investments are seamlessly transferred to your chosen individual in the event of unforeseen circumstances, providing an extra layer of security for your financial assets.