SEBI Nomination Rules for Demat and Mutual Fund Accounts Take Effect September 1: What Changes

A major SEBI investor-onboarding change is about to become operational. From September 1, 2026, the Securities and Exchange Board of India’s revised nomination framework for demat accounts and mutual fund folios takes effect, requiring regulated entities to implement new forms, system logic and investor communication processes under Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676 dated May 29, 2026.

The circular applies to asset management companies and their registrars and transfer agents, recognised depositories and registered depository participants. SEBI said the changes were made after stakeholders raised operational challenges with the earlier nomination framework and after considering feedback received through public consultation.

Single-holder accounts: nominate or expressly opt out

For every single-holder demat account or mutual fund folio opened on or after implementation, the investor must provide a nomination unless an opt-out declaration is submitted in the prescribed format. Nomination remains optional for jointly held accounts and folios, but the consent of all joint holders is required when a nominee is provided or changed, irrespective of the account’s mode of operation.

Investors may appoint up to three nominees. Where multiple nominees are named, they may, after the investor’s death, continue in the same account or folio or open separate accounts or folios for their respective holdings.

Online and offline nomination both remain available

Regulated entities must make the prescribed nomination form available in both online and offline modes. For online nomination, SEBI permits validation through a Digital Signature Certificate, Aadhaar-based e-sign or another legally recognised e-sign facility, or two-factor authentication in which one factor is an OTP sent to the investor’s registered mobile number and email address.

For a physical nomination form signed with a wet signature, a witness is not required. If the investor uses a thumb impression instead, the impression must be witnessed by two persons and their names and addresses must be captured in the form.

SEBI has reduced the mandatory data fields

The revised form narrows the information that an investor must provide. The name of the nominee and the nominee’s relationship with the investor are mandatory. If the nominee is a minor, date of birth is also mandatory.

Other details are optional, including the nominee’s mobile number, email address, percentage share, KYC or personal identifier and guardian details for a minor nominee. Regulated entities must still provide fields for these optional details so investors can choose whether to fill all, some or none of them.

If an investor appoints multiple nominees without specifying percentage shares, the assets are to be divided equally. Any odd lot after division will go to the first nominee named in the form.

Changes, cancellations and acknowledgements

Investors may provide, change or cancel nominations any number of times. The prescribed forms also apply to later changes and cancellations and to existing investors. SEBI requires regulated entities to provide an acknowledgement for every instance of nomination or subsequent change.

Periodic account or holding statements must show either the name of the nominee or a Yes/No indication of whether nomination has been made, depending on the choice exercised by the investor.

New nudges for accounts without a nomination

Depository participants and mutual fund RTAs have an additional communication obligation for existing and newly opened accounts or folios without nomination, including cases where the investor has opted out. They must send bi-annual email and SMS messages nudging and guiding investors to provide a nomination and display a pop-up on the benefits of nomination on the first login of the day on the relevant web, mobile or platform interface. These messages and pop-ups are not required for investors who have already provided a nomination.

What compliance and operations teams should complete

- Update digital and physical nomination forms to the SEBI-prescribed formats.

- Test single-holder account-opening logic so nomination or a valid opt-out is captured.

- Enable the specified online authentication methods and the separate thumb-impression witness process for offline forms.

- Configure equal apportionment and odd-lot treatment where percentage shares are not given.

- Ensure every nomination or change produces an acknowledgement and the holding statement reflects the investor’s chosen disclosure.

- Build the bi-annual nudge and first-login pop-up controls for accounts that remain without a nomination.

SEBI states that the circular supersedes earlier circulars on nomination for demat accounts and mutual fund folios and requires depositories to make necessary amendments to their bye-laws, rules and regulations. For CAs and compliance teams advising AMCs, RTAs, depositories or DPs, September 1 is therefore an operational implementation date, not merely an investor-awareness milestone.

Official source: View the official source document

Key takeaway

The circular is older but its operative date is imminent, creating strong deadline-driven search demand and practical compliance value.