Description

NSE implements revised nomination facilities allowing investors to opt-out via OTP-based authentication or video recording, effective December 15, 2025.

Summary

NSE has issued implementation guidelines for revised nomination facilities on the NSE MF Invest Platform, following SEBI circular SEBI/HO/OIAE/OIAE_IAD-3/P/ON/2025/01650 dated January 10, 2025. The changes enable investors to formally opt-out of nomination through two methods: OTP-based authentication with declaration or video recording. The revised facilities will be effective from December 15, 2025, and apply only to non-demat transactions.

Key Points

  • Three new fields added to UCC (Unique Client Code) structure for non-demat transactions
  • Mode of Opt-Out field captures investor’s preferred opt-out method (OTP or Video)
  • Opt-out Declaration field obtains investor declaration for OTP-based authentication
  • Unique Reference Number field captures the reference number of the opt-out process
  • Existing fillers in UCC file structure will be utilized; no structural changes to existing format
  • Additional headers will be added in APIs for these new fields
  • No impact on existing SIPs, additional purchases, and redemptions in non-demat/physical mode
  • No changes to existing transaction processes or reports

Regulatory Changes

The circular implements SEBI’s revised nomination framework with the following technical specifications:

Field Structure Updates:

  • Field 122 (NOMINATION OPT): Character field, size 1, mandatory, values Y/N
  • Field 176 (NOMINEE OPT OUT PROOF): Character field, size 1, conditional mandatory - required if NOMINATION OPT is ‘N’; values: ‘O’ for OTP with declaration, ‘V’ for video recording
  • Field 177 (NOMINEE OPT OUT REF. NO): Character field, size 20, conditional mandatory - required if NOMINATION OPT is ‘N’; stores OTP/video recording reference number

Regulated Entities Responsibilities: The following entities must capture and store opt-out evidence:

  • AMCs of Mutual Funds and their RTAs
  • AMFI
  • Recognized Depositories
  • Registered Depository Participants

Compliance Requirements

For Trading Members:

  • Update UCC registration systems to capture three new nomination opt-out fields
  • Implement OTP-based authentication workflow for opt-out declarations
  • Implement video recording workflow as alternative opt-out method
  • Maintain unique reference numbers for all opt-out transactions
  • Apply changes only to non-demat transactions
  • Ensure existing transactions remain unaffected

For Regulated Entities:

  • Capture and securely store evidence of investors opting out of nomination
  • Submit evidence to RTA/AMC/Regulator on demand or at defined intervals
  • Maintain audit trail of opt-out processes

Declaration Requirements: Investors opting out must confirm they:

  • Do not wish to appoint nominee(s) for mutual fund units
  • Understand the issues involved in non-appointment of nominees
  • Are aware that legal heirs will need to submit court documents or documents from competent authority based on asset value in the folio

Important Dates

  • January 10, 2025: SEBI circular issued (SEBI/HO/OIAE/OIAE_IAD-3/P/ON/2025/01650)
  • November 25, 2025: NSE implementation circular issued
  • December 15, 2025: Revised nomination facilities become effective

Impact Assessment

Operational Impact:

  • Medium impact on mutual fund platform operators requiring system updates to UCC registration processes
  • Technology teams need to implement two distinct opt-out workflows (OTP and video recording)
  • API modifications required to handle additional headers for new fields
  • Database schema updates needed to store opt-out evidence and reference numbers

Investor Impact:

  • Enhanced investor protection through formalized opt-out process
  • Additional documentation burden for investors choosing to opt-out of nomination
  • Legal heirs of deceased investors without nominees will face increased documentation requirements

Market Impact:

  • Low immediate market impact; primarily an operational and compliance update
  • Applies only to new UCC registrations and modifications post-December 15, 2025
  • Existing portfolios and transactions continue without disruption
  • No changes to trading, settlement, or existing SIP/redemption processes

Impact Justification

Operational change affecting mutual fund investor onboarding and nomination processes; requires system updates but no immediate market impact