New Delhi, March 17 (NationPress) The Securities and Exchange Board of India (SEBI), India’s financial regulatory authority, has released a consultation paper proposing adjustments to the nomination rules for demat accounts and mutual fund folios, inviting feedback from the public.

These proposed changes aim to revise the circular dated January 10, 2025, concerning nomination facilities in the securities sector, enhancing the investor onboarding experience and ensuring better alignment with banking regulations.

Currently, the existing framework, which was established last year, permits individual investors to designate one nominee (excluding minors) to manage their accounts if they become physically incapacitated, as long as they retain the mental capacity to enter into contracts.

However, nominees are restricted from modifying essential account information such as bank details or contact numbers.

Furthermore, the present regulations require investors to provide at least one personal identifier for the nominee, including PAN, driving license number, or the last four digits of Aadhaar, along with complete contact details, relationship status, and birth date for minors.

Investors are allowed to nominate as many as 10 individuals in a mutual fund folio, but Power of Attorney (PoA) holders cannot make nominations.

Additionally, the market regulator has identified potential implementation challenges and risks linked to granting nominees the authority to operate accounts. SEBI has pointed out that the industry has reported high compliance costs, challenges in maintaining audit trails, and significant risks of fraud, misuse, and legal disputes.

To mitigate these issues, SEBI has suggested allowing the current Power of Attorney mechanism to be utilized in circumstances where an investor is incapacitated yet capable of entering a contract.

Moreover, SEBI aims to simplify the nomination process by minimizing mandatory requirements. It proposes that only the nominee's name and the relationship with the investor should be mandatory, with additional details being optional.

Furthermore, the regulator has suggested that nomination should become the default choice when opening new accounts.

For existing accounts lacking a nomination or opt-out, intermediaries will be mandated to remind investors periodically via email and SMS to finalize the nomination process.

Lastly, while the 2025 circular increased the number of allowed nominees from three to 10, SEBI acknowledges that this could pose operational difficulties. Consequently, it is now proposing to limit the number of nominees to four for both demat accounts and mutual fund folios, while maintaining a cap of three joint holders.