SEBI Nomination Rules for Demat Accounts & Mutual Fund Folios from Sept. 1, 2026

A new SEBI rule that took effect in September 2026 has raised concerns among investors about whether their existing Demat accounts or Mutual Fund folios could be affected.

What Has SEBI actually changed?

SEBI issued a circular on 29 May 2026 modifying the existing nomination framework across demat accounts and mutual fund folios, and the new framework takes effect from 1 September 2026. SEBI says single accounts/folios opened on or after implementation must provide nomination unless an opt-out declaration is submitted. Leaving the field blank is no longer an option for fresh single-holder accounts.

For physical nomination, a witness is not required when the investor signs with a wet signature. However, if a thumb impression is used instead of a signature, the form must be witnessed by two persons.

allows up to three nominees per account, and lets investors modify or cancel nominations as many times as they wish. Jointly held accounts and folios remain exempt from this mandate, though any change to a joint account’s nomination still needs consent from all holders.

Does This Affect Existing Demat Accounts and Mutual Fund Folios?

For existing accounts opened before 1 September 2026, SEBI’s current framework does not impose an automatic freeze. Investors without a nominee on file will instead start receiving reminders twice a year through SMS and email, along with pop-up prompts when they log into their broker or fund platform. The intermediaries, meaning depository participants and mutual fund RTAs, are the ones being pushed to nudge investors.

Why is SEBI Pushing this Now?

When an investor passes away without a nominee on record, their family often has to go through transmission, a process that can involve affidavits, indemnity bonds, and in some cases a succession certificate from a court. That process can stretch across months. SEBI’s stated objective is to make the nomination process easier and help prevent the generation of unclaimed assets. The opt-out declaration itself explains that nomination can help identify the person for transfer of securities and facilitate faster and smoother transmission to legal heirs after an investor’s death.

What Does the New Nomination Process Look Like?

The mechanics have been simplified compared with earlier nomination rules, which should reduce the friction that put many investors off in the first place.

• Nominate up to three individuals per demat account or mutual fund folio
• The nominee’s name and relationship with the investor are mandatory. Date of birth is also mandatory when the nominee is a minor. Other details such as mobile number, email, percentage share and KYC/identifier are optional.
• Complete the process online through digital signatures, Aadhaar e-sign, or OTP verification
• Submit a formal opt-out declaration if you would rather not nominate anyone
• Update, add, or remove nominees any number of times without restriction

It is worth being clear about what a nominee actually is and isn’t. Indian courts have consistently held that a nominee’s role is custodial: they can collect the assets after the investor’s death, but succession law or a valid will ultimately determines who owns them. Nomination speeds up access; it does not override inheritance rights.

What Should Investors do after September 1?

For anyone opened a new demat account or mutual fund folio after 1 September, nomination or a formal opt-out will simply be part of the onboarding form, so there is little to plan for beyond having a name and relationship ready.

Existing investors are in a slightly different position. Reviewing every demat account and mutual fund folio you hold and checking whether a nominee is actually on file is worth doing now rather than waiting for a reminder notification to prompt it. For larger family holdings, investors can add multiple nominees under the revised framework.

Brokers and mutual fund platforms are also expected to make this easier on their end. Under the circular, depositories, depository participants, mutual fund companies, and registrar and transfer agents are required to update their systems before the implementation date. For someone with accounts spread across two or three platforms, checking each one separately is still the safest approach, since a nominee added on one demat account does not automatically carry over to a mutual fund folio held elsewhere.

Conclusion

SEBI’s revised nomination framework, effective from 1 September 2026, narrows its mandatory scope to new single-holder demat accounts and mutual fund folios, while existing account holders face reminders rather than an account freeze. The intent behind the rule is straightforward: reduce the pile of unclaimed securities that builds up when families cannot easily prove ownership after an investor’s death. Updating a nomination takes only a few minutes online, and given what it can save a family in time and paperwork later, treating it as a minor formality rather than urgent action is the real risk here.

Frequently Asked Questions (FAQs)

Will my existing Demat account get frozen if I don’t nominate anyone?

No. Under the September 2026 framework, existing accounts without a nominee will receive periodic reminders rather than being frozen.

What is the maximum number of nominees that I may add to one demat account or mutual fund folio?

You may nominate up to 3 people in one demat account or mutual fund folio under the new SEBI guidelines and can amend/remove nominees whenever you wish.

Is nomination compulsory in the case of joint demat accounts and mutual fund folios?

No, nomination is not compulsory in the case of jointly held demat accounts and folios, although if there is a change in the nomination in the case of jointly held folios/accounts, then the consent from all joint holders is necessary.

When I Nominate someone, do they become the legal owner of my investments after my death?

No. Nomination facilitates the transmission of securities after the investor’s death. It does not by itself replace succession planning or a valid will. Investors should consider applicable succession laws and their estate-planning requirements.

Can I opt out of Nomination entirely for a new account?

Yes. You can submit a formal opt-out declaration instead of naming a nominee, but you cannot leave the field blank for a new single-holder demat account or mutual fund folio opened on or after 1 September 2026.