SEBI extends the deadline for mutual fund nominations by three months

The deadline for mutual fund account holders to nominate a beneficiary or to opt out of it by filing a declaration form was extended by the market regulator Securities and Exchange Board of India (SEBI) on Wednesday till January 1. If they fail to do so, their folios will be frozen. Previously, mutual fund investors had until September 30 at the latest to submit their choice of nominee.

The move is intended to assist investors in securing their assets and passing them to their legitimate heirs.

“Based on representations received from the market participants, it has been decided that the provision… about the freezing of folios, shall come into force with effect from January 1, 2024 instead of September 30, 2023,” SEBI said in a circular.

Further, SEBI asked asset management companies (AMCs) and RTAs to encourage unit holders to fulfill the nomination requirement or opt out of the nomination by communicating with all such unit holders who are not in compliance with the nomination requirement on a fortnightly basis via emails and SMS.

As of or after August 1, 2022, mutual fund subscribers must mandatorily submit the nomination details or a declaration to opt out of the nomination, according to a circular issued by the Securities and Exchange Board of India (SEBI) on June 15, 2022.

The deadline was often extended.

The majority of mutual fund folios have reportedly been formed in the past without nominating to whom the assets should be transferred if the account holders pass away, according to market experts.

This indicates that the difficulties of various types of documentation procedures prevented the assets from being transferred to the legitimate heirs.