Let’s face it. None of us can predict what’s waiting around the corner.
Ensuring your loved ones are kept safe in any unexpected situation is paramount. However, surprisingly, many overlook a simple but important step: adding enrollments to all their investments, bank accounts and insurance policies.
It’s not just about streamlining matters for your beneficiaries; It’s about protecting your hard-earned money from going missing and making sure it’s claimed correctly.
What is really surprising is the considerable amount of unclaimed assets currently sitting idle in demat accounts, mutual funds and insurance policies due to lack of enrolment. Estimated anywhere between 50,000 and 80,000 crores, there is no house that goes for this big.
Seeing the problem, the Securities and Exchange Board of India (SEBI) has published an advisory to facilitate your enrollments for demat accounts and other securities.
Why nominations are important
Inclusion of nominees in demat accounts is indispensable to ensure seamless transfer of securities such as shares, bonds and mutual funds in the unfortunate event of death of the account holder. This important step ensures that the transmission of these securities is smooth and risk-free. Consequently, it protects the account holder from the possibility of losing the investment or getting stuck in a legal quagmire.
By adding nominees to your account, you’re not only simplifying matters for your beneficiaries—you’re securing a brighter, more stable future for your loved ones.
What SEBI’s consultation paper says
The consultation letter by SEBI covers any doubts you may have about the nomination process for securities.
Before examining its contents, it is important to understand that a consultation paper is a document that initiates discussions around policy proposals and ideas. Therefore, any point laid down by SEBI is not binding, i.e. make a new law or policy. They are merely recommendations put forward for further discussion and consideration.
Looking at the content of the consultation papers, they broadly address three issues:
- What is the enrollment process?
- Role of nominees with respect to legal heirs and wills
- Method of appointing candidates
It is also clearly stipulated that nomination is a ‘purely optional process’. SEBI has recommended that in a single person-ended demat account, there is a clear declaration that they do not want to appoint a nominee. It is only a measure for procedural ease and clarity.
One thing to keep in mind before reading the paper is the difference between nominees and legal heirs, which can often be a point of confusion for a person. As highlighted by various financial experts and publications, nominees are not legal heirs of securities. They are only temporary custodians who are responsible for ensuring that securities are correctly transferred to legal heirs according to will or law. They are similar to an executor of a will in this respect, but for a specific asset, in this case, securities.
In the paper, SEBI provides suggestions on the procedures for how nominees can be appointed and how they should act. Candidates can be easily appointed through digital methods, however, security is kept in mind in this process as well as by ensuring the need for digital signatures or Aadhaar-based eSigns. The identity of the proposed candidate(s) is also required to be provided. Apart from this, physical enrollment through fingerprinting and authentication continues to be offered.
It provides for various scenarios, such as single accounts, joint accounts, simultaneous death of account holders among others, and how a nominee will be given charge of the account for the next steps in each case. It also states which legal heirs are entitled to the securities in case of joint accounts, etc.
You can read a more detailed summary of the paper, and give your feedback by March 8, 2024, here on the Civis platform.
Civis is a civil-technical organization that collects and simplifies draft laws and policies that are open to public feedback, with the goal of making the process as simple as possible for you.
The consultation paper is hosted with a summary that you can read in an accessible format, both in English and Hindi, and give your feedback.
This article was written by the team at Civis.vote, a non-profit platform that works to build dialogue using technology to bridge the gap between government and citizens.
Edited by Padmashri Pandey.