Current mutual fund holders have until March 31 to choose a beneficiary or choose not to participate by filing a declaration form; if they fail to do so, their accounts will be locked and they won’t be able to withdraw their money.
As on or after August 1, 2022, mutual fund subscribers must submit the nomination details or a statement 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 cutoff date was later raised to October 1, 2022.
All current mutual fund folios, including those owned jointly, have a deadline of March 31, 2023, after which they will be blocked for debits.
Niranjan Babu Ramayanam, COO of Anand Rathi Wealth Ltd, explained the reasoning for the Sebi’s decision by pointing out that several investment accounts had previously been established without specifying to whom the assets should be transferred in the event that the account holders suffered a loss.
This indicates that the inconveniences of various types of paperwork procedures prevented the assets from being transferred to the legitimate heirs.
Many lawful heirs who should be claiming these assets don’t even know about them. In investment accounts when the owners are dead and no one has made a claim, there are sizable investments that are languishing unclaimed. This might encourage criminals to fabricate paperwork and remove assets that have been left ignored for a very long period, the speaker said.
Asset management companies (AMCs) will be required, under the new framework, to provide unit holders the option of submitting either the nomination form or the declaration form for opting out of the nomination via physical or online submission, depending on their preferences.
If you choose the physical option, the forms will include the wet signatures of each unit holder. If you choose the online option, the forms will use an e-sign facility rather of each unit holder’s wet signature.
AMCs must take all necessary measures to safeguard the confidentiality and safety of client data and must make sure that suitable systems are in place for offering the e-sign service.
The action aims to harmonize business procedures across all participants in the securities market.
Investors who opened new trading and demat accounts in 2021 had the same option available to them, according to Sebi.
There are now 42 mutual fund companies, and they together handle assets of around Rs 40 lakh crore.
