Description

SEBI mandates all mutual fund investors to either nominate or formally opt-out with proper authentication, effective December 15, 2025 for fresh folios under non-demat mode.

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 and requires proper authentication through OTP-based 2FA 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 end.

Key Points

  • All mutual fund investors must either nominate or formally opt-out of nomination
  • Requirement applies to both existing and new investors
  • Authentication involves OTP-based two-factor authentication (2FA)
  • Opt-out requires either signed declaration or video verification
  • Unique reference number must be generated and maintained for opt-out documentation
  • Members must upload and store nomination opt-out documents for submission to RTA/AMC/Regulator when required
  • Nomination details can be added or modified at any time with re-authentication
  • All holders in UCC will receive authentication link for validation

Regulatory Changes

SEBI has introduced comprehensive nomination requirements for mutual fund investments:

  • Mandatory Action: Investors must either designate a nominee or formally opt-out; there is no middle ground
  • Authentication Protocol: OTP-based 2FA is required to verify requests from registered email ID or mobile number
  • Documentation: Opt-out requires formal declaration form or video recording as per SEBI norms
  • Reference Tracking: Unique reference number must be generated for opt-out process and mentioned on declaration form and at UCC level
  • Modification Rights: Investors can change nomination details at any time, requiring re-authentication for changes

Compliance Requirements

For Members/Intermediaries:

  • Upload nomination opt-out declaration forms through: Admin » Client Details » ELog / Image Upload (web portal) or existing API interface
  • Store all opt-out documentation records securely
  • Provide records to RTA/AMC/Regulator as and when required or at defined intervals
  • Generate unique reference numbers for opt-out processes
  • Facilitate two-factor authentication for all holders

For Investors:

  • Complete nomination or opt-out process for all mutual fund investments
  • For online opt-out: Complete OTP-based 2FA and submit formal declaration form or record video per SEBI norms
  • Ensure all holders in joint accounts complete authentication process
  • Maintain unique reference number for opt-out documentation

For AMC/RTA:

  • Reject transactions for fresh folio creation under non-demat mode without proper nomination compliance from December 15, 2025
  • Process nomination changes via NCT/NFT process (Notice number 20250530-76)

Important Dates

  • December 15, 2025: Implementation date - transactions in fresh folios 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 ensure uninterrupted transaction processing
  • Enhanced investor protection through formal nominee designation or opt-out
  • Potential for transaction delays or rejections if investors fail to comply by deadline

Operational Impact:

  • Members must implement systems to capture, authenticate, and store nomination/opt-out data
  • Additional documentation and verification processes required for all fresh folio creation
  • Enhanced record-keeping requirements for opt-out declarations and video recordings
  • API and web portal infrastructure must support document upload and storage

Compliance Impact:

  • High compliance burden on intermediaries to ensure investor awareness and completion
  • Regulatory scrutiny on proper authentication and documentation processes
  • Risk of transaction rejection creating investor dissatisfaction if not properly communicated

Investor Impact:

  • Mandatory action required for all investors to continue transactions in fresh folios
  • Flexibility to modify nomination at any time with re-authentication
  • Enhanced succession planning through formal nomination process
  • Additional authentication steps may impact user experience

Impact Justification

Mandatory SEBI requirement affecting all mutual fund investors with strict implementation deadline; non-compliance will result in transaction rejection for fresh folios