SEBI Proposes Guardrails and Additional Measures to Revamp Nomination Facilities in the Securities Market

SEBI’s consultation Paper dated 02-02-2024

On Feb 02, 2024, SEBI issued a consultation paper proposing guardrails and additional measures to revamp nomination facilities in securities market nomination facilities in the Indian securities market. The changes have been proposed to aid in the reduction of unclaimed assets as well as smoothen the process for surviving families/beneficiaries/successors of deceased investors. Proposals further aim to address the concerns of investors that nomination facilities can be regarded as safe, secure, convenient and reliable means for making, changing or cancelling nominations.

The SEBI has proposed that the nominations should be made, changed or cancelled in a safe, secure, verifiable manner; i.e., by use of:

(a) Digital signature certificate or

(b) Aadhaar-based e-sign or

(c) physical signatures of the investors or

(d) through dual authentication.

In case where nomination is done by affixing a thumb impression, then the same shall be affixed in the presence of two independent witnesses. This serves to address non-repudiation risk and aid verifiability if so required.

SEBI’s proposal shows a proactive approach to address security concerns and improve the reliability of nomination facilities in the securities market. Also, the measures aim to strike a balance between embracing digital advancements and accommodating traditional methods, ensuring inclusivity and security in the nomination process.

Further, it has been proposed that when an investor opts to make nomination/s, then personal Identifiers (such as name of either parent and/or number of any Government issued ID – PAN, Passport, Aadhaar, etc.) and Contact details of the nominee/s (such as physical address, email address, telephone / mobile number) should be provided by the investor/s. This serves to aid contact-ability and identification of the nominee/s upon death of the investor. Existing investors can be provided an option to update such personal identifiers.

SEBI has proposed that a mechanism for due acknowledgement of making or changing or cancelling nomination shall be provided to the investor/s. Due records of the same shall be maintained by the regulated entities for the prescribed period.

It has also proposed that the nomination facilities may be made, changed or cancelled at any time without any restrictions as to the number of times such facilities are utilized.

Nomination facilities would permit multiple nominee/s and be increased from the current limit of three (3) to very high two digits or to very high three digits (i.e 99 or 999), which are large and sufficiently high to address ordinary requirements of individual investors.

Further, in case of Mutual Funds, online transactions are not allowed for joint accounts and accordingly, to allow e-nomination, it has been proposed that online transactions should be allowed in joint accounts also adopting the same mode of bank accounts.

The Securities and Exchange Board of India (SEBI) has sought comments till March 8 from the public.

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