SEBI changed the rules for nomination in mutual funds and demat accounts in the board meeting on September 30. Earlier, only 3 people were allowed to be nominated. Now an investor can appoint up to 10 nominees. The nominee has also been allowed to take decisions on behalf of incapacitated investors.
SEBI has made changes in the nomination rules for mutual funds and demat accounts. This decision was taken in the meeting of SEBI’s board on 30 September. Now investors are allowed to make up to 10 nominees in mutual funds and demat accounts. The question is, aren’t 10 nominees too many? Experts say that this can complicate things. Some experts are calling it impractical. They believe that this can make things difficult instead of making things easier.
Too many nominees can cause problems
Rajat Dutta, founder of Inheritance Needs Services, said that if one or say 10 nominees do not cooperate in implementing the terms of the will after the death of the investor, then it can create problems. SEBI has also said that the nominees of MF accounts or demat accounts will be the trustees and not the last owner. The Supreme Court had said this in its decision in a recent case. According to SEBI, the legal heir of the deceased will not get any legal rights.
Nominee has the right to take decisions on behalf of the incapacitated investor
SEBI has allowed the nominee to take decisions on behalf of incapacitated investors. However, some terms and conditions have been attached to it. Experts say that this is not the right step and it will not stand the scrutiny of the court. More information is still awaited in this regard. The role of a nominee begins when the investor dies. After the death of the investor, the bank, mutual fund or depository participant gives the ownership of the asset to the nominee, because as a trustee his role is that of a beneficiary.
Fraud cases may increase due to new rules
After getting the right to the assets, the nominee is expected to pass on the assets to the rightful heir as per the succession law or as per the will. Dutt says that SEBI has given the nominee the right to take decisions on behalf of the incapacitated investor, which can lead to fraud. This step is not in the interest of Indians who live abroad. There are many Indians living abroad whose parents or siblings live in India.
Signatures of joint holders are not required to add the name of the nominee
The rules for adding or changing the name of the nominee in the mutual fund folio have now become easier. For this, the signatures of the joint holders will no longer be required. This has increased the risk of fraud. Suppose an elderly woman lives alone in a city and the responsibility of taking care of her is on the caregiver. Her children live in another city. In such a situation, the caregiver can add his name as a nominee and withdraw the money.
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