Sebi proposes revamping nomination process

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The Securities and Exchange Board of India (Sebi) on Friday proposed revamping the nomination rules in a bid to reduce unclaimed assets in the securities market and simplify the process for claiming the assets by successors of a deceased investors.

Sebi issued a consultation paper, in which it proposed revising nomination facilities for securities such as shares, bonds, units of REITs, InvITs, AIFs and other securities held in dematerialised form and mutual funds mentioned in  a statement of account.

This is expected to provide convenience to investors and uniformity in the procedures to institutions. This facility will not affect the existing laws on transmission and succession when a person dies with or without leaving a Will.

Public can submit comments till March 8.

Sebi noted that the main factors leading to higher unclaimed are incomplete nominations or unavailability of nominations for financial assets in the securities markets.

This has led to the transmission process becoming a headache for the family or successors of the deceased. The regulator has suggested that nominations should be made, changed or cancelled in a safe, secure, verifiable manner by using digital signature or Aadhaar-based eSign or physical signatures of the investors or through dual authentication.

If nomination is done by affixing a thumb impression, the same should be in presence of two independent witnesses. This serves to address non-repudiation risk and aid verifiability.

Further, nomination facilities will permit multiple nominees and be increased from current limit of only three to two-digit or three-digit (i.e 99 or 999), which are large and sufficiently high to address ordinary requirements of individual investors.

Nomination facilities can be made, changed or cancelled at any time without any restrictions as to the number of times such facilities is utilised, Sebi suggested.

In case of joint holdings and rule of survivorship being applicable, no documentation related to KYC, or undertakings should be required from the surviving joint holders.

In absence of nominations, the legal heirs should be required to produce due evidence and follow the procedures prescribed (under applicable law) for the purpose of effecting transmission in their favour.

In order to give effect to the proposals, depositories and asset management companies managing mutual funds (and their registrars) should update their systems for the nomination facilities. With inputs from PTI