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Sebi Tells Investors To Either Opt-In For Nomination Or Opt-Out By March 31, 2023

Existing mutual fund folios will be frozen for debits if nomination opt-in or opt-out declaration is not given by March 31, 2023, according to a recent guideline by Sebi.

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Sebi Tells Investors To Either Opt-In For Nomination Or Opt-Out By March 31, 2023

The Securities and Exchange Board of India (Sebi) wishes to bring in uniformity in practices across all market participants, especially in case of nomination for mutual fund units. 

The market regulator, on June 15, came out with a circular which said that if any mutual fund unit holder does not wish to file a nomination for his/her holdings, then he/she will need to give a separate declaration about that.

Read below to know more about the process and for which mutual fund investors this circular applies to.

To Whom Does It Apply

Sebi said in the circular that it would be applicable to both existing as well as new mutual fund investors. The deadline for doing so is set by Sebi as March 31, 2023, and if investors do not opt-in or opt-out for nomination by that time, then their folios will be frozen for debits.

New investors who are subscribing to mutual funds on or after August 1, 2022 will have two options at the time of purchase:

They can either provide their nomination information in the format as specified by Sebi, or, they can opt out of nomination by signing a declaration form as specified by Sebi.

Regarding safety of client data, Sebi has asked all mutual fund houses to deploy adequate systems in place for providing the e-Sign facility, and also told them to maintain the confidentiality and safety of their clients’ records.

Declaration Forms

Sebi said in the circular that it has specified the nominee opt-out form in Annexure A of the said circular, and that investors who wish to not name a nominee to their holdings must submit that form to their respective mutual fund houses.

Both the nominee opt-in and opt-out forms will be made available by the respective mutual fund for submission by the unit holders.

Submitting The Declaration Form

Sebi has said that the nomination or the declaration form for opting out of nomination has to be submitted to the mutual fund house either in physical or an online mode, and that it must be signed by the unitholders. In case of joint mutual fund holdings, the joint holders have to sign it too.

Physical Mode: Sebi has said that in the physical form submission method, the forms must compulsorily carry the wet signature of the respective unitholders.

Online Mode: If the said nomination or declaration form is submitted in an online mode, then it must contain the e-Sign instead of the wet signature. This e-Sign technology will also have to be recognised under the Information Technology Act, 2000. 

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