Description

SEBI mandates all mutual fund investors to either nominate or formally opt-out with authentication requirements effective December 15, 2025.

Summary

SEBI has mandated that all mutual fund investors must either designate a nominee or formally opt-out of nomination facilities. 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. Starting December 15, 2025, transactions for fresh folio creation under non-demat mode without proper nomination compliance will be rejected at the AMC/RTA level.

Key Points

  • All mutual fund investors must either nominate or formally opt-out
  • Applies to both existing and new investors
  • Authentication requires OTP-based 2FA with signed declaration or video verification
  • Member must generate unique reference number for opt-out documentation
  • Nominations can be registered at UCC level or Folio level at AMC/RTA
  • Nomination details can be modified later with re-authentication
  • Members must upload and store opt-out documents for regulatory inspection
  • Documents must be provided to RTA/AMC/Regulator when required

Regulatory Changes

SEBI has introduced comprehensive nomination requirements for mutual fund investments:

  • Mandatory Action: Investors must either nominate or opt-out; no middle ground
  • Authentication Protocol: Two-factor OTP authentication required for all holders in UCC
  • Documentation: Opt-out requires signed declaration form or video recording
  • Reference System: Unique reference number must be generated and maintained by members
  • Record Keeping: Members must maintain opt-out documents and provide to regulators on demand

Compliance Requirements

For Investors:

  • Complete nomination or opt-out process online or offline
  • Authenticate via OTP on registered email ID and mobile number
  • Submit formal declaration form or video recording for opt-out
  • All holders in UCC must complete authentication

For Members/Intermediaries:

  • Generate unique reference number during opt-out process
  • Upload Nomination Opt-Out Declaration forms via Admin » Client Details » ELog/Image Upload or existing API interface
  • Store opt-out documentation securely
  • Provide records to RTA/AMC/Regulator as required
  • Reject non-compliant fresh folio transactions from December 15, 2025

Authentication Requirements:

  • OTP sent to all holders’ registered email and mobile
  • Re-authentication required for any nomination changes
  • No OTP required if only adding reference number without changing authentication mode

Important Dates

  • December 15, 2025: Mandatory compliance date - transactions for fresh folio creation under non-demat mode without proper nomination compliance will be rejected at AMC/RTA level

Impact Assessment

High Impact on Market Participants:

  • All Mutual Fund Investors: Must take action to either nominate or opt-out to avoid transaction rejections
  • Intermediaries/Members: Must implement systems for authentication, reference number generation, and document storage
  • AMCs/RTAs: Must enforce rejection of non-compliant transactions from December 15, 2025
  • Fresh Folio Creation: Non-compliant requests will be rejected, potentially disrupting new investments
  • Operational Changes: Members need to upgrade systems for OTP authentication, document upload, and reference number management
  • Compliance Burden: Increased documentation and record-keeping requirements for all market participants

Impact Justification

Mandatory SEBI requirement affecting all mutual fund investors with transaction rejection penalties starting December 15, 2025