Description

SEBI mandates all mutual fund investors to either nominate or formally opt-out with proper authentication. Fresh folio creation under non-demat mode without compliance will be rejected from December 15, 2025.

Summary

SEBI has mandated that all mutual fund investors must either designate a nominee or formally opt-out of nomination for their investments. This applies to both existing and new investors. The opt-out process requires OTP-based two-factor authentication along with either a signed declaration or video verification. Members must generate and maintain a unique reference number for opt-out documentation. From December 15, 2025, transactions for fresh folio creation under non-demat mode without proper nomination compliance will be rejected at AMC/RTA level.

Key Points

  • All investors must either nominate or formally opt-out for mutual fund investments
  • Applies to both existing and new investors
  • Opt-out requires OTP-based 2FA with signed declaration or video verification
  • Members must generate unique reference number for opt-out process
  • Nomination details can be updated at UCC level or Folio level at AMC/RTA
  • All holders in UCC must authenticate through OTP for nomination updates
  • Members must upload and store opt-out declaration documents
  • Documents must be provided to RTA/AMC/Regulator when required
  • Upload path: Admin » Client Details » ELog / Image Upload
  • API interface available for uploading opt-out declarations

Regulatory Changes

SEBI has introduced stricter requirements for nomination in mutual fund investments:

  • Mandatory nomination or formal opt-out for all investors
  • Enhanced authentication process using OTP-based two-factor authentication
  • Documentation requirements for opt-out: signed declaration form or video recording
  • Unique reference number system for tracking opt-out requests
  • Authentication required from all holders in UCC for any nomination changes
  • Document retention requirements for members maintaining investor opt-out records

Compliance Requirements

For Investors:

  • Designate a nominee or complete formal opt-out process
  • Complete two-factor authentication via OTP
  • Submit signed declaration form or video recording for opt-out
  • Authenticate using registered email ID and mobile number

For Members/Intermediaries:

  • Generate unique reference number during opt-out process
  • Upload and store nomination opt-out declaration documents
  • Maintain opt-out records and provide to RTA/AMC/Regulator as required
  • Add reference number on Nomination Opt-Out Declaration Form and at UCC level
  • Ensure all holders authenticate through OTP for UCC creation/modification
  • Use web portal (Admin » Client Details » ELog / Image Upload) or API for document upload

For AMCs/RTAs:

  • Reject transactions for fresh folio creation under non-demat mode without proper nomination compliance
  • Process nomination changes via NCT/NFT process

Important Dates

  • December 15, 2025: Implementation date - transactions in fresh folio creation under non-demat mode without proper nomination compliance shall be liable for rejection

Impact Assessment

Market Impact:

  • All mutual fund investors must take action to either nominate or opt-out
  • Fresh folio creation under non-demat mode will be blocked without compliance
  • May cause initial transaction delays as investors complete nomination/opt-out process

Operational Impact:

  • Members must implement systems for generating unique reference numbers
  • Additional documentation and record-keeping requirements
  • Need to set up upload mechanisms via web portal or API
  • Authentication process adds steps to UCC creation/modification
  • All holders must complete OTP authentication for any nomination changes

Investor Impact:

  • Enhanced investor protection through mandatory nomination or formal opt-out
  • Additional steps required for new investments from December 15, 2025
  • Need to maintain registered email ID and mobile number for authentication
  • Flexibility to modify nomination details at any time with re-authentication

Impact Justification

Mandatory SEBI requirement affecting all mutual fund investors with strict December 15, 2025 implementation deadline. Non-compliance will result in transaction rejections for fresh folio creation.