SEBI Proposes To Simplify Nomination Rules For Demat, Mutual Funds; Suggests Cutting Nominee Limit To 4

The Securities and Exchange Board of India (SEBI) has recently issued a consultation paper proposing to simplify nomination norms for demat accounts and mutual fund folios after operational difficulties were reported in implementing its January 10, 2025 circular that had revamped the nomination framework.

In the January circular, SEBI had made nomination mandatory for single holders, allowed up to ten nominees, required detailed nominee information, and introduced a facility enabling a nominee to operate the account if the investor is physically incapacitated but capable of contracting.

According to SEBI, implementation of these changes led to operational challenges, including a nominee acting on behalf of incapacitated investors, the requirement of multiple nominee details, the opt-out declaration process, and the increase in the number of nominees.

To address these issues, SEBI has placed four proposals for public comments to simplify the nomination process and improve ease of investor on-boarding.

Under Proposal 1, SEBI has sought views on whether the existing mechanism of operation of an account through a Power of Attorney is sufficient where the investor is incapacitated.

Under Proposal 2, SEBI has proposed simplifying nomination details by making only the name of the nominee and the relationship with the investor mandatory, while other details such as address, contact details, identifier, and share of the nominee may be optional.

Under Proposal 3, SEBI has proposed that nomination should be the default option at the time of opening a demat account or mutual fund folio, with investors required to opt out if they do not wish to nominate.

Under Proposal 4, SEBI has proposed reducing the maximum number of nominees to four instead of ten allowed under the January 2025 circular, citing operational concerns.

Public comments have been invited till April 7, 2026.