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Nomination

  • Nomination Facility
  • Who can nominate?
  • Who can be a nominee?
  • Who cannot make a nomination?
  • Who cannot be a nominated?
  • How to Nominate?
  • Implications of making a nomination / cancellation of nomination
  • For Units held in Electronic (Demat) Mode
  • Why must one make a nomination?

Nomination is a facility that enables an individual unitholder (including sole proprietor of sole proprietary concern) to nominate a person, who can claim the Units held by the unitholder or the redemption proceeds thereof in the event of death the unitholder.

If the Units are held jointly by more than one person, all joint unit holders are required to together nominate a person in whom all the rights in the units would vest in the event of death of all the joint unit holders.

As per Regulation 29 A of SEBI Mutual Funds Regulations, 1996, mutual funds are required to provide an option to the individual unitholders to nominate in the manner specified in the Fourth Schedule.

Nomination facility is available only to individuals (including sole proprietor of a sole proprietary concern).

Other than a company/body corporate, partnership firm, Hindu Undivided Family (HUF) , society or a trust (other than a religious or charitable trust), one may nominate any person including a minor.

In case the nominee is a minor, the name and address of the guardian of the minor nominee shall be provided by the customer making the nomination.

Even a non-resident Indian (NRI) can be a Nominee, subject to the exchange control rules in force, from time to time.

Nomination can also be made in favour of the Central Government, State Government, a local authority, any person designated by virtue of his/her office or a religious or charitable trust.

A Power of Attorney Holder (PoA) and a guardian investing in mutual fund units on behalf of a minor cannot nominate.

So far as a minor is concerned, a guardian is appointed to take care of financial affairs of a minor till the minor attains the age of majority. Transactions made through the guardian during the period a child is a minor has to be ratified by the minor subsequent to attaining the age of majority. Hence, law does not permit the guardian to be a nominee in the same account, as it shall be the sole discretion of minor after attaining age of majority.

The Nominee shall not be a trust (other than a religious or charitable trust), society, company/body corporate, partnership firm, Hindu Undivided Family (HUF) etc.

Nomination can be made either at the time of initial application for purchase of Units or subsequently.

To make a nomination while investing with a mutual fund for the first time, the applicant may by fill up the ‘Nomination’ section provided in the account opening application form. And to register a nomination subsequently, the investor needs to fill up the prescribed Nomination form and submit the duly completed Nomination form at the designated investor service centre of the mutual fund or its Registrars.

Nomination once made can be changed subsequently any time and any number of times.

A person may nominate upto three persons, and clearly indicate the percentage of allocation/share in favour of each of the nominee against their names, and such allocation/share shall be in whole numbers without any decimals. In the event the percentage of allocation /share for each of the nominees is not specified, the AMC shall settle the claim equally amongst all the nominees.

The Nomination Form is required to be signed by the unit holder (with hand-written signature). In case the units are held jointly, all joint holders will need to sign the nomination form, irrespective of the mode of operation of the account (i.e., whether by ‘anyone or survivor’ or ‘jointly’).

A nomination in respect of the Units does not create an interest in the property after the death of the Unit holder. The rights in the Units will vest in the nominee(s) only upon the death of all Unit Holders. It may be noted that a nominee may not necessarily acquire any title or beneficial interest in the property by virtue of this nomination. The nominee(s) shall receive the Units only as an agent and trustee for the legal heirs or legatees as the case may be.

Nomination in respect of units stands rescinded upon redemption of units. Cancellation of nomination can be made only by those individuals who hold units on their own behalf, singly or jointly, and who made the original nomination.

A new nomination request will result in simultaneous cancellation of existing nomination and replacing the same by fresh nomination, i.e., a fresh nomination for a folio/ account will automatically overwrite an existing nomination.

On cancellation of nomination, the nomination shall stand rescinded and the AMC/Mutual Fund shall not be under any obligation to transmit the units in favour of any of the nominees.

Transfer of units/payment of redemption proceeds to a nominee shall be valid and effectual against any demand made upon the mutual fund/AMC, and shall discharge the mutual fund/AMC of all liability towards the estate of the deceased unit holder and his/her successors and legal heirs, executors and administrators.

If the Mutual Fund or the AMC or the Trustee were to incur or suffer any claim, demand, liabilities, proceedings or if any actions are filed or made or initiated against any of them in respect of or in connection with the nomination, they shall be entitled to be indemnified absolutely for any loss, expenses, costs, and charges that any of them may suffer or incur absolutely from the investor’s estate.

As regards mutual fund units held in electronic (demat) mode with a depository, the nomination details provided by the Unitholder to the depository will be applicable to the mutual fund Units held in demat mode. Such nomination including any variation, cancellation or substitution of Nominee(s) shall be governed by the rules and bye-laws of the Depository.

Payment of the sums to the nominee in respect of a demat account shall discharge the Mutual Fund of all liability towards the estate of the deceased Unit holder and his/her legal successors/legal heirs. In case a demat account has joint holders, in the case of death of any of the joint holder(s), the securities will be transmitted to the surviving holder(s). Only in the event of death of all the joint holders, the Units / securities will be transmitted to the nominee.

In case nomination is not made by a Unitholder, the Units would be transmitted to the account of legal heir(s), depending whether the deceased person has left behind a Will and as per applicable succession law, which involves lengthy (and sometimes expensive & cumbersome) procedure.

Nomination is a simpler and inexpensive way to make things easy for one’s near and dear ones to claim the money in your mutual fund folio, demat account or bank account expeditiously, through minimal paper after one’s death.

To claim the Units after the death of a unitholder, the nominee has to complete the necessary formalities, such as completion of KYC process, along with proof of death of the unit holder, signature of the nominee duly attested, furnishing of proof of guardianship in case the nominee is a minor, and such other document as may be required for transmitting the units in favour of the nominee(s).