SEBI’s revised nomination norms for demat accounts and mutual fund folios: A detailed guide

The Securities and Exchange Board of India has substantially reshaped the nomination regime for demat accounts and mutual fund folios through Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676 dated 29 May 2026. The new framework, effective from 1 September 2026, seeks to simplify investor on-boarding, streamline nomination and opt‑out processes, and reduce the risk of securities and units turning into unclaimed assets.

These changes apply across the securities market to:

  • Asset Management Companies (AMCs) of mutual funds and their Registrars to an Issue and Share Transfer Agents (RTAs)
  • Recognized Depositories
  • Registered Depository Participants

This article explains the revised framework in a practical manner for assessees and intermediaries, while preserving the legal essence of the circular.

Background and regulatory context

Earlier framework and need for change

SEBI had earlier introduced a comprehensive revamp of nomination facilities via its circular dated 10 January 2025 on “Revise and Revamp Nomination Facilities in the Indian Securities Market”, which came into force on 1 March 2025. That circular attempted to:

  • Make nomination easier and more standardised
  • Encourage investors to nominate so that securities do not remain unclaimed after death
  • Improve the overall transmission and investor protection framework

However, following the rollout, SEBI received multiple representations from depositories, AMCs, mutual fund RTAs, depository participants and other stakeholders. These highlighted operational difficulties in enforcing the 2025 norms on the ground, particularly in relation to:

  • Practical aspects of implementing mandatory nomination or opt‑out
  • Online and offline processes and validation requirements
  • Handling of existing accounts and folios
  • Communication and nudging obligations

After public consultation and review of this feedback, SEBI decided to modify and simplify the earlier framework through the 29 May 2026 circular, while retaining the central policy goal of reducing unclaimed assets and easing transmission to legal heirs or nominees.

The circular clearly states that it is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, empowering SEBI to:

  • Protect the interests of investors in securities
  • Promote the development of the securities market
  • Regulate the securities market

The circular has been issued with the approval of the competent authority and is hosted on SEBI’s website under “Legal → Circulars”.

Core policy change: default approach to nomination

Single-holder accounts and folios – nomination or opt‑out now mandatory

For all single-holder demat accounts and mutual fund folios opened on or after the implementation date of this circular:

  • The assessee must either:
    • Provide a nomination, or
    • Submit a formal opt‑out declaration in the prescribed format (Annexure‑B)

In effect, the system now follows a “comply or expressly decline” model:

  1. Default expectation – the investor names a nominee.
  2. Alternative – the investor explicitly states, in a specified declaration, that they do not wish to appoint any nominee as of now.

Note: Without either a valid nomination form or a valid opt‑out declaration, a single-holder account/folio opened after the implementation date should not be treated as compliant under the revised norms.

For demat accounts and mutual fund folios held jointly:

  • Nomination continues to be optional.

  • However, if a nomination is to be:

    • Provided initially, or
    • Modified at any later point,

    then all joint holders must consent, and their signatures/authorisations are required, irrespective of the mode of operation (e.g., “either or survivor”, “anyone or survivor”, etc.).

This ensures that no nomination or change in nomination can be effected without the express agreement of every joint holder.

Number of nominees and handling of multiple nominees

Limit of up to three nominees

Under the modified framework:

  • An assessee may appoint a maximum of three nominees for any demat account or mutual fund folio.
  • This cap applies regardless of the size or nature of holdings in that particular account or folio.

Rights of multiple nominees after investor’s demise

When more than one nominee has been registered and the assessee passes away:

  • The nominees have the flexibility to:
    • Continue as joint holders in the same demat account or folio, or
    • Have their respective entitlements transmitted into separate demat accounts or folios in their individual names.

This flexible structure is intended to ease post‑death asset consolidation and give nominees the option to manage their inherited securities/units either jointly or separately.

Modes of providing nomination – online and offline

Standardised nomination form (Annexure‑A)

SEBI has introduced a uniform format for nomination through Annexure‑A of the circular. All regulated entities (AMCs, RTAs, depositories and depository participants) must:

  • Make this form available to investors
  • Ensure that both online and offline interfaces follow the same basic structure and required fields

Online nomination – permitted authentication mechanisms

Where a regulated entity offers online nomination facilities, it must design its system in line with Annexure‑A and enable secure electronic validation through one or more of the following methods:

  1. Digital Signature Certificate (DSC); or
  2. Aadhaar-based e-sign, or any other e‑sign facility recognised under the Information Technology Act, 2000; or