The Securities and Exchange Board of India (Sebi) abolished the debit freeze rule on demat and mutual fund accounts lacking nominations, effective June 30, 2024. Sebi had extended the deadline to update details in demat and mutual fund folios several times since 2021. As per Sebi’s June 10, 2024 circular, it is still mandatory for new investors to give nominee details.

However, following representations from market participants, Sebi decided to give some relief to the existing investors. They can now continue to make withdrawals from their accounts.

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Key Points From The Circular:

Account holders holding securities in physical forms without PAN, “choice of nomination”, bank account and contact details, and updated signatures can still request dividend, interest, and redemption payments through the electronic mode only, effective April 1, 2024.

Such investors can also raise grievances, if any, but only after updating their know-your-customer (KYC), PAN card, and nomination details. For new investors, providing a ‘Choice of nomination’ for single-holding accounts is mandatory.

Why Should You Still Update Your Nomination?

Nomination updation is cost-free and ensures smooth account settlements in the event of the accountholder’s death. In many instances, due to a lack of nomination, conflicts within the family members had arisen over the deceased person’s assets. A simple nomination can save them from such troubles. Also, if the accounts are updated, the account holder will have only a few formalities to perform for account closures or fund transfers, making the process faster.

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According to the Sebi circular, “All existing investors/unitholders shall be encouraged to provide ‘choice of nomination’ for ensuring smooth transmission of securities held by them as well as to prevent accumulation of unclaimed assets in the securities market.”

Despite abolishing the debit freeze rule, Sebi still directs the fund houses, depository participants, and the registrar and transfer agents (RTAs) to encourage investors to keep their nominations updated. “In the case of demat accounts, the depository participants and for mutual funds, the fund houses and RTAs shall encourage the demat account holders/mutual fund unitholders to update ‘choice of nomination’ by sending a communication on a fortnightly basis by way of emails and SMS to all such demat account holders/mutual fund unitholders who have not provided the ‘choice of nomination,” the circular reads.