Introduction:
The Securities and Exchange Board of India (SEBI) has issued a new circular, Circular No. SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/160, dated September 27, 2023, addressing the nomination process for mutual fund unit holders. This circular extends the timelines for nomination and provides important updates. Let’s delve into the details of this SEBI circular.
Key Highlights of the Circular:
Extension of Nomination Timelines:
SEBI had previously prescribed the requirement for all existing individual unit holders of mutual funds, whether holding units solely or jointly, to nominate or opt out of nomination by September 30, 2023. Failure to comply with this requirement would result in the freezing of folios for debits.
However, based on representations received from market participants, SEBI has decided to extend the provision regarding freezing of folios. Instead of September 30, 2023, this provision will now come into effect from January 1, 2024.
Encouragement for Compliance:
Asset Management Companies (AMCs) and Registrar to an Issue and Share Transfer Agents (RTAs) are directed to encourage unit holders to fulfill the nomination requirement or opt out of nomination. They should do so by sending regular communications, including emails and SMS, to unit holders who have not yet complied with the nomination requirement. These communications should provide guidance on the nomination process.
Unchanged Provisions:
It’s important to note that all other provisions of Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 dated June 15, 2022, and SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/105 dated July 29, 2022, remain unchanged.
Conclusion:
SEBI’s latest circular provides mutual fund unit holders with an extension of the nomination deadline. This extension until January 1, 2024, allows unit holders more time to comply with the nomination requirement. AMCs and RTAs are actively encouraged to communicate with unit holders to guide them through the nomination process.
As investors, it’s crucial to stay informed about regulatory changes like this one to ensure compliance and protect your investments in mutual funds. This circular is part of SEBI’s ongoing efforts to safeguard the interests of investors in securities and regulate the securities market effectively.
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Securities and Exchange Board of India
Circular No. SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/160 Dated: September 27, 2023
To
All Mutual Funds
All Asset Management Companies (‘AMCs’)
All Trustee Companies/ Boards of Trustees of Mutual Funds
All Registrar to an Issue and Share Transfer Agents (‘RTAs’)
Association of Mutual Funds in India (‘AMFI’)
Sir / Madam,
Subject: Nomination for Mutual Fund Unit Holders – Extension of timelines
1. SEBI vide Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 dated June 15, 2022 read with SEBI Circular No. SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/105 dated July 29, 2022, and SEBI Circular No. SEBI/HO/IMD/IMD-I POD1/P/CIR/2023/47 dated March 28, 2023 prescribed the requirement for nomination/ opting out of nomination for all the existing individual unit holder(s) holding mutual fund units either solely or jointly, by September 30, 2023, failing which the folios shall be frozen for debits.
2. Based on representations received from the market participants, it has been decided that the provision mentioned at para 4 of SEBI Circular dated June 15, 2022 with regard to freezing of folios, shall come into force with effect from January 01, 2024 instead of September 30, 2023.
3. AMCs and RTAs shall encourage the unit holder(s) to fulfil the requirement for nomination/ opting out of nomination by sending a communication on fortnightly basis by way of emails and SMS to all such unit holder(s) who are not in compliance with the requirement of nomination. The communication shall provide guidance by which the unit holder(s) can provide nomination or opt out of nomination.
4. All other provisions of Circular No. SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/82 dated June 15, 2022 and SEBI/HO/IMD/IMD-I DOF1/P/CIR/2022/105 dated July 29, 2022 shall remain unchanged.
5. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.
6. This Circular is available on SEBI Website at www.sebi.gov.in
Yours faithfully,
Peter Mardi
Deputy General Manager
Investment Management Department
Tel: 022 – 26449233
Email: peterm@sebi.gov.in
