Sebi report flags Alarming Lack of Nominations in Demat Accounts
MAS Team | 05 February 2024
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A recent consultation paper from the Securities and Exchange Board of India (Sebi) has unveiled a concerning trend — a staggering 9.8 crore demat accounts, equivalent to 72.48% of the total 13.6 crore single holding accounts, lack crucial nomination details. This revelation comes at a time of record-breaking increases in demat account registrations, amplifying risks for a significant number of investors.
The breakdown of the data indicates that 69.73%, or 9.51 crore, account holders have intentionally refrained from nominating, while approximately 2.76% find themselves in a state of indecision, neither nominating nor opting out.
In a notable contrast, mutual fund (MF) folios present a more robust adherence to nominations. Only 6% of MF folio holders have chosen to opt out, and 8% have neglected to nominate or opt out among the 8.90 crore MF folios.
In the realm of joint holdings, 31% of demat account holders and 7% of mutual fund folios have opted out of nominations. However, a higher proportion of mutual fund folios in joint holding (27.19%) have neither nominated nor opted out, compared to the 6% observed for demat accounts.
This apparent anomaly is attributed to modern stock brokers who are sidestepping the nomination process. According to a source familiar with the matter, brokers are opting out of nominations on behalf of demat account holders, updating nomination details without the account holder's explicit consent.
Originally, Sebi had set a deadline of 31 March 2023, for account holders to nominate beneficiaries or formally opt out, with the threat of account deactivation for non-compliance. The deadline was subsequently extended to September 30 and then December 31, 2023. However, as the deadline approached, some stock brokers updated details without seeking the approval of account holders to avoid deactivation.
Last month, Sebi extended the deadline for the third time to June 30, 2024. The regulator cautions that without a valid nomination, the process of accessing demat account holdings becomes intricate and time-consuming for legal heirs, potentially involving probated wills, letters of administration, or succession certificates.
It's crucial to note that a nominee is essentially a custodian of securities until the legal heir inherits them. Creating a will is recommended to ensure the smooth inheritance of assets and properties. Harmonizing the nomination with the contents of the will is advisable to prevent conflicts between the nomination and subsequent bequest to a legal heir.
Dear Investor,
In case of any grievance / complaint :
In case of any grievance / complaint :
- Please contact Compliance Officer Pankaj Raheja at [email protected] and Phone No. - 91-22-35131664.
- You may also approach CEO Debashis Basu at email- id [email protected] and Phone No. - 91-22-35131664.
