The deadline of September 30, 2023, for amending mutual fund (MF) investment nominations is rapidly approaching. However, a sizable portion of investors have not yet finished this important work. A startling 25 lakh Permanent Account Number (PAN) users haven’t changed their nomination information, according to a Moneycontrol investigation. The fact that many of these PAN cardholders have investments distributed across numerous mutual fund (MF) schemes makes the matter much more complicated.
Notably, the Securities and Exchange Board of India (SEBI) has mandated that all mutual fund investors submit nomination declarations by September 30 or choose not to participate in nominations. Investor debits might be frozen if they miss the deadline, according to SEBI. As a result, investors won’t be able to take money out of mutual funds.
Existing investors who have already submitted nomination information do not need to do so again. Those who plan to submit their nomination or choose not to be nominated but have not yet done so should do so.
the significance of the nomination
A person can be nominated by an individual unitholder (including the sole proprietor of a sole proprietary firm) to receive the units they own or the earnings from their redemption in the event that the unitholder passes away. Without nomination, the investments might be the subject of drawn-out, possibly expensive legal processes.
Concerns
Mutual fund distributors (MFDs) have highlighted a number of challenges that clients face while revising their nominations, particularly in situations where investments are held jointly.
All joint holders must agree to update the nomination for such folios, whether done online or by physically submitting a form, on platforms like CAMS (a mutual fund transfer agency) and KFintech (an RTA). Online updates become impossible when all holders’ contact information (email ID and mobile) is missing or inadequate because this consent frequently depends on OTP-based authentication. The only choice is to submit a physical nomination form when even KYC records are missing contact information.
Investors who use physical forms to change their nominations offline run into problems. Form rejections due to signature mismatches are prevalent, and they are especially problematic for senior individuals whose signatures may have changed over time.
Investors can resolve this by submitting a “Banker’s Attestation of Signature” form to the appropriate RTA or fund house, which must be signed by their folio-linked bank branch.
Elderly people and NRI investors who do not have an active Indian mobile number might potentially experience issues with nomination updates. Investors in such situations have two options: online or offline. The nomination form must be submitted on paper if submitting it online is not possible.
On their X (formerly Twitter) account, users have even mentioned various problems with nominations. On the KFintech site, a user claimed he doesn’t see any way to put a mother-in-law as a nominee.
How do you nominate?
By using a two-factor authentication login on trading platforms for stock brokers or depository participants who provide this service, investors can submit or withdraw their nominations. The previously mandatory information—such as a mobile number, email address, and identity information for the nominee or the nominee’s guardian of a minor—has been changed to an optional field. There is a declaration form that the account holder must sign.
A witness signature is not necessary if the account user uses a thumbprint in place of a signature while filling out nomination or declaration forms online using the e-sign feature. Investors can use the “online nomination option” by going to the National Securities Depository Limited (NSDL) website.
A person may nominate up to three people, and they must each have their percentage allocation or share clearly indicated next to their names. This allocation or share must be expressed in whole numbers only, without decimals. The asset management company (AMC) will divide the claim evenly among all of the nominees if the proportion of allocation or share for each nominee is not specified.
By downloading nomination forms from the relevant RTA websites and submitting them to the RTAs or each fund house, investors who have investments spread across many fund houses can streamline the process.
