SEBI eliminates freezing of accounts, folios of investors and nominee

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The Securities and Exchange Board of India (SEBI) has announced significant modifications to the criteria for submitting the 'choice of nomination' for demat accounts and mutual fund folios.

SEBI has issued a new circular, extending the deadline for existing investors to submit their 'option of nomination' for demat accounts and mutual fund folios till June 30, 2024.

SEBI has decided to eliminate the freezing of accounts and folios for existing investors who have not submitted nomination details, in an effort to simplify investment procedures and improve investor convenience.

This extension ensures that demat accounts and mutual fund folios will not be frozen for debits due to non-submission of nomination details. This move is intended to avoid any disruption in investors' access to their funds and assets.

Investors who own stocks in physical form but have not yet updated their PAN, choice of nomination, contact information, bank account information, or specimen signature will no longer suffer restrictions.

Beginning April 1, 2024, these securities holders will be able to receive payments electronically, including dividends, interest, and redemption amounts.

As per reports from ANI, SEBI has simplified the process for existing investors by reducing the number of essential forms for amending nomination details to just three.

Listed businesses will notify security holders of such payments electronically, provided they comply with the new standards.

This move is part of SEBI's attempts to expedite the compliance process and encourage more investors to submit nomination information.

According to SEBI's circular, existing investors and security holders must update their 'option of nomination' to enable smooth transmission of securities and prevent the buildup of unclaimed assets in the securities market.

Despite the eased measures for current investors, all new investors and unit-holders are still required to offer the 'choice of nomination' for demat accounts and mutual fund folios, with the exception of jointly held accounts and folios.

The formats for offering or opting out of nomination are explained in the circular's Annexures A and B, as reported by ANI.

This circular demonstrates SEBI's commitment to protecting investor interests and developing a streamlined, transparent securities market.

Despite the loosening of certain requirements, SEBI urges investors to complete the nomination process for their own benefit.

Security holders who have physical folios can now file grievances or service requests to the Registrar and Transfer Agents (RTAs) without presenting a 'option of nomination.'

Dividend, interest, and redemption payments will also flow without these specifics.

Depository participants, Asset Management Companies (AMCs), and RTAs will send out biweekly reminders via email and SMS to demat account and mutual fund unit holders who have not given their nomination information.

When entering into demat or mutual fund accounts, investors will also see a pop-up reminder to amend their nomination information. This feature will be accessible beginning October 1, 2024.

The reports from the agency states, that the terms of the revised circular, with the exception of the pop-up reminders, will take effect immediately. Clause 7, which applies to pop-up reminders, will take effect on October 1, 2024.

Stock exchanges, depositories, AMCs, RTAs, and listed firms must update their bye-laws, business rules, and regulations to reflect the new legislation.

They must also convey the new guidelines to their people and monitor compliance with the modified regulations.

SEBI hopes that by simplifying the nomination submission process, it would increase investor convenience and encourage greater compliance with critical regulatory standards.