SEBI nomination norms for demat accounts and mutual fund folios from 1 September 2026: the nominee is still a trustee
A new single-holder demat account or mutual fund folio can no longer be opened without either a nomination or a signed opt-out. The change will put nominees on more registers than ever before. It does not make any of them owners.
What the circular does
SEBI’s circular of 29 May 2026 replaces eighteen earlier circulars on nomination, some dating back to 2002, with a single framework that took effect on 1 September 2026. For a single-held demat account or mutual fund folio opened on or after that date, the investor must either name up to three nominees in the standard form or formally opt out in the prescribed declaration. Leaving the field blank, which was how most accounts came to have no nominee at all, is no longer possible.
The rest of the circular is housekeeping of a useful kind. The witness requirement for physical nominations signed with a wet signature is gone, surviving only where a thumb impression is used. Online nomination is permitted through a digital signature certificate, an e-sign facility recognised under the Information Technology Act, 2000, or two-factor authentication with an one-time password to the registered mobile number and email. Only three fields are mandatory: the nominee’s name, the relationship, and the date of birth where the nominee is a minor. Percentage shares, contact details, the nominee’s KYC identifier and guardian details for minors are all optional, and where percentages are not given the holding is divided equally with any odd lot going to the first-named nominee.
Existing accounts are not frozen and carry no penalty. They are nudged: bi-annual email and SMS reminders, and a pop-up on the first login of each day, for any account or folio without a nomination. Holding statements must now display either the nominee’s name or a yes-or-no indicator, at the investor’s election.
| Item | Position |
|---|---|
| Circular | SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676 dated 29 May 2026, issued under Section 11(1) of the SEBI Act, 1992 |
| Effective | 1 September 2026. The supersession of the eighteen earlier nomination circulars took effect on 29 May 2026 |
| Applies to | New and existing demat accounts and mutual fund folios, through depositories, depository participants, asset management companies and registrars |
| New single accounts | Nomination mandatory unless the investor opts out in the prescribed declaration. Account opening cannot proceed on a blank field |
| Joint accounts | Nomination optional. Consent of all joint holders is required to give, change or cancel a nomination, whatever the mode of operation |
| Number of nominees | Up to three. Equal division where percentages are not specified, with any odd lot to the first-named nominee |
| Mandatory fields | Name, relationship, and date of birth if the nominee is a minor. Percentage share, contact details, KYC identifier and guardian details are optional |
| Execution | Wet signature needs no witness; a thumb impression needs two. Online through DSC, e-sign or two-factor authentication |
| Existing accounts | No freeze and no penalty. Bi-annual reminders and a daily first-login pop-up for any account without a nomination, including where the investor has opted out |
| Legal effect | Unchanged. The nominee takes as trustee for those entitled under succession law, and the nomination form now says so |
What it does not do
Nomination has never been a mode of succession, and this circular does not make it one. In Shakti Yezdani v. Jayanand Jayant Salgaonkar, decided on 14 December 2023, the Supreme Court held that the vesting language in Section 109A of the Companies Act, 1956, which is in the same terms as Section 72 of the Companies Act, 2013, and in bye-law 9.11.1 under the Depositories Act, 1996, does not confer ownership. Vesting operates for the limited purpose of allowing the company to deal with the securities in the immediate aftermath of a death and of avoiding uncertainty about who holds them. A will executed in accordance with the Indian Succession Act, 1925 supersedes the nomination.
The useful novelty is that SEBI has now written that position into the form. The standard nomination annexure records that the nominee receives the holdings on behalf of, and as trustee for, the legal heirs. An investor who signs it will find it harder to contend afterwards that nomination was understood as a testamentary act, which is an argument that has featured in this line of litigation for two decades.
Where the friction will be
More nominations, more mismatches
Nominations are made at the counter, usually at account opening, often on a prompt from a relationship manager, and almost never revisited. Wills are made later, with advice, and are updated. Marriage, divorce, a second family, a business separation or a family settlement all change the will and none of them change the form. Making nomination the default at the point of entry means the volume of stale nominations will grow, and with it the number of estates where the holder of the asset and the person entitled to it are different people.
The nominee holds; the heir has to establish
This is the part that decides how disputes actually run. On death the nominee is recorded, the securities move, and the nominee is in possession. The beneficiary under the will has the better right but has to establish it, and in Mumbai that route ordinarily runs through probate: under Sections 57 and 213 of the Indian Succession Act, 1925, a will made by a Hindu, Buddhist, Sikh or Jain within the ordinary original civil jurisdiction of the Bombay High Court, or dealing with immovable property there, must be probated before an executor or legatee can establish a right under it in court. Probate takes what it takes. The nominee holds the portfolio throughout.
Nomination does not mean the same thing across asset classes
Clients treat nomination as one concept. It is not, and a succession plan that assumes uniformity will misfire on at least one asset.
| Asset | Statutory basis | Effect on death |
|---|---|---|
| Listed securities and mutual fund units | Section 72, Companies Act, 2013; bye-laws under the Depositories Act, 1996 | The nominee is recorded as holder but takes as trustee for those entitled under succession law |
| Bank deposits | Section 45ZA, Banking Regulation Act, 1949 | The nominee may receive payment and give a valid discharge to the bank, but the money remains part of the estate |
| Life insurance | Section 39, Insurance Act, 1938, as amended in 2015 | Where the nominee is a parent, spouse or child, the nominee is beneficially entitled. This is the exception, not the rule |
Promoter holdings in listed companies
For a family with a promoter block the nomination decides the public record. Transmission on death is exempt from the open offer obligation under Regulation 10(1)(g) of the takeover code, with a report to the exchange under Regulation 10(6), and disclosures follow under Regulation 29(2) and the insider trading regulations. Exchange filings in this form routinely describe the acquirer as the nominee of the deceased holder. So the nominee is on the register, in the shareholding pattern and in the filings, in a promoter or promoter group capacity, while holding on trust for whoever the will names. Where the family intends the block to devolve differently, the public position and the beneficial position stay apart for as long as the estate takes to settle, and promoter classification under the listing regulations has to be managed in the meantime.
Minor nominees
Date of birth is mandatory for a minor nominee; guardian details are not. That is an odd division, because a minor cannot deal with securities and the registrar will need to reach a guardian to do anything at all. Recording the guardian, and matching that person to the guardian named in the will, costs nothing at the time and saves a great deal later.
The opt-out that does not stop the reminders
The nudge obligation applies to accounts without a nomination, expressly including those where the investor has opted out. A client who has opted out deliberately, because the estate is governed by a will and the family prefers not to create a divergent record, will still receive the bi-annual reminders and the daily pop-up. That should be explained in advance. Otherwise the considered position gets reversed one evening at a login prompt, by a client who assumes the reminder means something has gone wrong.
The ANSV take
SEBI is solving for unclaimed assets, and on that measure the circular is sensible and overdue. The side effect belongs to succession practice rather than securities practice. Nomination is now the default, captured at the point of onboarding, generally without advice, and it settles who will hold the asset on death even though it settles nothing about who owns it. In a contested estate, holding the asset is worth a great deal.
The answer is not to resist nomination but to make the two documents agree. Where a will leaves the portfolio to one person, that person should be the nominee. Where it divides the portfolio, the percentage field should be completed even though it is optional, because the equal-division default will not match most wills. Where the arrangement is deliberately different, the reason should be recorded when the decision is taken; a contemporaneous file note will do more work in a dispute than the form ever will.
Two points are worth watching. The first is whether the trustee language in the nomination form begins to appear in argument, as it should, in transmission disputes decided after September 2026. The second is the gap between the public record and the beneficial position in promoter families, which the takeover exemption makes frictionless to create and succession law makes slow to resolve. Reconciling nominations against the will is now part of an annual review, not an item to attend to when something happens.
Checklist for a succession review
- Schedule every demat account, mutual fund folio, deposit and policy, and record the nomination standing against each.
- Use the holding statement as the audit trail: it must now display the nominee’s name or a yes-or-no indicator.
- Reconcile each nomination against the will, and record the reason wherever the two differ by design.
- Specify percentage shares even though they are optional, and check the odd-lot rule where holdings are small or uneven.
- Record guardian details for minor nominees, and match the guardian to the person named in the will.
- For joint accounts, factor in that every joint holder must consent to any nomination or change.
- For promoter holdings, plan the transmission filings in advance: the Regulation 10(1)(g) exemption, the Regulation 10(6) report, disclosures under Regulation 29(2), and promoter classification under the listing regulations.
- Re-examine nominations after marriage, divorce, a birth, a death or a family settlement. The form does not update itself.
- Tell clients who have opted out that the reminders and pop-ups continue, so a considered position is not reversed at a prompt.
- Where the estate will need probate, build the timetable on the basis that the nominee holds the assets throughout.
References
- SEBI Circular No. SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676 dated 29 May 2026, Ease of doing investments – Modified Norms for Nomination in Demat Accounts and Mutual Fund Folios.
- Shakti Yezdani v. Jayanand Jayant Salgaonkar, Civil Appeal No. 7107 of 2017, judgment dated 14 December 2023 (2023 INSC 1076).
- Companies Act, 2013, Section 72; Companies (Share Capital and Debentures) Rules, 2014, Rule 19.
- Depositories Act, 1996, and the depository bye-laws on nomination.
- Indian Succession Act, 1925, Sections 57 and 213.
- Banking Regulation Act, 1949, Section 45ZA; Insurance Act, 1938, Section 39, as amended by the Insurance Laws (Amendment) Act, 2015.
- SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Regulations 10(1)(g), 10(6) and 29.