Mutual fund nomination deadline to end on 31 March. Details here
2 min read 26 Mar 2023, 12:08 PM ISTUnder the new framework, asset management companies (AMCs) will have to provide an option to the unit holders to submit either the nomination form or the declaration form for opting out of the nomination in physical or online as per the choice of the unit holders.
PremiumIf existing mutual fund investor fail to nominate beneficiary by 31 March, their accounts will be frozen. The existing mutual fund investors have time till 31 March to nominate a beneficiary or opt out of it by submitting a declaration form, failing which their folios will be frozen, and they will not be able to redeem investment.
This comes after capital market regulator Securities and Exchange Board of India (Sebi), in its circular on June 15, 2022, made it mandatory for mutual fund subscribers to submit the nomination details or declaration to opt out of the nomination on or after August 1, 2022, following which the deadline was extended to 1 October 2022.
The deadline for all the existing mutual fund folios, including jointly-held ones, was then set as 31 March 2023, failing which the folios will be frozen for debits.
Importance of adding nominees
Explaining the rationale behind the Sebi's move, Anand Rathi Wealth Ltd COO Niranjan Babu Ramayanam told PTI that many investment accounts in the past have been opened without nominating anyone to whom the assets should be transmitted in case something happens to the account holders.
This means that the rightful heirs had difficulty in getting the assets transmitted to them due to the hassles of different kinds of documentation requirements.
"Many rightful heirs don't even know about such investments, which are supposed to be claimed by them. Huge investments are lying unclaimed in the investment accounts where the holders are deceased and none of their heirs has claimed for the same. This may lead to miscreants creating fake documents and withdrawing investments that have been lying unattended for a very long time," he added.
How to add nominee
Mutual fund investor can add nominees via MFCentral. It is an investor services hub conceived by CAMS and KFintech. If mutual fund units are purchased through a demat account, the nomination for the demat account will be applicable for those units.
Under the new framework, asset management companies (AMCs) will have to provide an option to the unit holders to submit either the nomination form or the declaration form for opting out of the nomination in physical or online as per the choice of the unit holders.
In the case of a physical option, the forms will carry the wet signature of all the unit holders and in the case of the online option, the forms will be using an e-sign facility instead of the wet signature of all the unit holders.
AMCs have to ensure that adequate systems are in place for providing the e-sign facility, and they need to take all necessary steps to maintain the confidentiality and safety of client records.
The move is aimed at bringing uniformity in practices across all constituents in the securities market.
In 2021, Sebi had given a similar choice to investors, who were opening new trading and demat accounts. At present, there are 42 mutual fund houses, which together manage assets to the tune of around ₹40 lakh crore.
(With inputs from PTI)
