The Securities and Exchange Board of India (SEBI) has issued a significant circular dated 29 May 2026 aimed at simplifying and strengthening the nomination framework for demat accounts and mutual fund folios. The revised norms are designed to improve investor convenience, streamline onboarding processes, reduce operational challenges faced by market intermediaries, and minimize the creation of unclaimed financial assets.
The new framework will come into effect from 1 September 2026 and will apply to both new and existing demat accounts and mutual fund folios.
Why Did SEBI Amend the Nomination Framework?
SEBI had earlier revamped the nomination process through its January 2025 circular. However, after receiving feedback from Asset Management Companies (AMCs), Depositories, Registrars and Transfer Agents (RTAs), Depository Participants (DPs), and other stakeholders, several operational challenges were identified.
Following public consultation and industry feedback, SEBI has now introduced a more practical and investor-friendly nomination mechanism that seeks to balance compliance requirements with ease of doing investments.
The objective remains clear: ensuring smoother transmission of securities and investments after the death of an investor while preventing assets from becoming unclaimed.
Mandatory Nomination for Individual Investors
Under the revised framework, all single-holder demat accounts and mutual fund folios opened on or after 1 September 2026 must have a nomination.
However, investors who do not wish to appoint a nominee can formally opt out by submitting the prescribed declaration form.
This approach creates a default expectation of nomination while preserving investor choice.
For jointly held accounts and folios, nomination remains optional. However, if a nomination is made or changed, consent of all joint holders will be mandatory regardless of the mode of operation.
Investors Can Nominate Up to Three Individuals
One of the most investor-friendly changes introduced by SEBI is the ability to nominate up to three persons.
Earlier nomination processes often created confusion where only one nominee was designated. The revised framework provides greater flexibility in estate planning and succession management.
Where multiple nominees are appointed:
• Assets may continue in the same account or folio after transmission.
• Nominees may alternatively choose to hold their respective portions in separate accounts.
• If percentage allocation is not specified, assets will be divided equally among nominees.
In cases where securities cannot be perfectly divided, any odd-lot balance will be transferred to the first nominee named in the nomination form.
Online Nomination Process Gets Simpler
SEBI has placed considerable emphasis on digital convenience.
Investors will now be able to submit nominations either online or offline.
For online nominations, validation can be completed through:
• Digital Signature Certificate (DSC)
• Aadhaar-based e-sign
• Any legally recognized e-sign facility
• Two-factor authentication (2FA) involving OTP verification through registered mobile number and email address
This move is expected to significantly improve the investor experience and reduce paperwork.
Offline Nomination Becomes Easier
For physical nomination forms, SEBI has simplified procedural requirements.
Investors signing the nomination form using a normal handwritten signature will no longer require a witness signature.
A witness requirement will arise only when the investor uses a thumb impression instead of a signature. In such cases, details of two witnesses must be recorded.
This change removes an unnecessary compliance hurdle that investors frequently faced.
What Information Must Be Provided for Nomination?
SEBI has reduced the amount of mandatory information required from investors.
Mandatory Information
The following details must be provided:
• Name of nominee
• Relationship of nominee with investor
• Date of birth if nominee is a minor
Optional Information
Investors may voluntarily provide:
• Mobile number
• Email address
• Percentage share of each nominee
• PAN, Aadhaar last four digits, passport, driving licence or other identifiers
• Guardian details for minor nominees
The simplified approach is expected to encourage greater adoption of nomination facilities.
Opt-Out Facility Continues
Investors who prefer not to appoint a nominee can still choose to opt out.
SEBI has prescribed a standard declaration format where investors acknowledge that:
• Nomination facilitates smooth transfer of investments after death.
• Absence of nomination may require additional legal documentation from heirs.
• Unclaimed investments may eventually be transferred to the Investor Education and Protection Fund Authority (IEPF) as per applicable laws.
The opt-out option will be available through both online and offline channels.
Unlimited Changes and Cancellation of Nomination
Investors retain complete flexibility over their nominations.
A nomination can be:
• Added
• Modified
• Replaced
• Cancelled
There is no restriction on the number of times an investor can update nomination details.
Further, regulated entities must issue an acknowledgement every time a nomination is added, modified, or cancelled.
New Obligations for Depositories, DPs, AMCs and RTAs
The revised framework imposes additional responsibilities on regulated entities.
Periodic account statements must now display either:
• The name of the nominee(s), or
• A simple indication showing whether nomination exists (Yes/No), depending on the investor's preference.
For accounts without nomination, regulated entities must actively encourage investors to complete the process.
This includes:
• Sending SMS and email reminders twice every year
• Displaying educational pop-up messages on websites and mobile applications during login
These reminders will not be shown to investors who have already completed nomination.
Applicability to Existing Accounts
Importantly, the revised nomination framework is not limited to new accounts.
The provisions will apply to existing demat accounts and mutual fund folios as well. Investors who already have accounts without nomination may continue to receive reminders and nudges from their service providers.
This reflects SEBI's broader goal of reducing unclaimed investments across the securities market.
Effective Date
The revised nomination framework will become operational from 1 September 2026.
AMCs, RTAs, Depositories, and Depository Participants are expected to modify their systems, forms, investor interfaces, and operational processes before the implementation date.
What This Means for Investors
The revised SEBI nomination norms represent a major step toward investor protection and ease of doing investments.
The ability to nominate up to three individuals, simplified online validation, removal of witness requirements for normal signatures, and reduced mandatory data requirements collectively make the nomination process more accessible than ever before.
Investors should review their existing demat accounts and mutual fund folios and ensure nomination details are updated well before any future transmission event arises.
A properly recorded nomination can significantly reduce delays, paperwork, and legal complications for family members and legal heirs.
How KP RegTech Can Help
At KP RegTech, we closely track SEBI regulatory developments affecting financial institutions, intermediaries, and investors. Our team assists market participants in understanding regulatory changes, implementing compliance frameworks, updating investor-facing documentation, and ensuring operational readiness for new SEBI requirements.
If your organization requires assistance in interpreting SEBI circulars, regulatory implementation, compliance reviews, or governance support, our experts can help ensure seamless compliance with evolving securities market regulations.