All you need to know about nominations in a mutual fund scheme

The Securities and Exchange Board of India on June 15 said investors, who are subscribing to mutual fund units from August 1, will have the choice of providing nomination or opting out of nomination. The regulator has issued a format for nomination form and opting out of nomination through a ‘declaration form’ in this regard, in a circular.

Here’s everything you need to know about nominations in a mutual fund scheme:

What is nomination in mutual funds?

Nomination is a facility that enables a unitholder to nominate a person, who can claim the units held by the investor or the redemption proceeds in case of death of the unitholder. If the units are held jointly by more than one person, all joint unit holders are required to together nominate a person.

How to nominate in a mutual fund?

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 fill up the ‘Nomination’ section provided in the account opening application form.

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

Is it mandatory to nominate someone?

It was mandatory by rule to have at least one nominee in mutual fund investments. However, on June 15, Sebi changed this law and allowed mutual fund investors to invest without specifying a nominee. Investors now can choose to either provide nomination or to opt out nomination through a signed declaration form.

Who can be a nominee?

An investor can nominate any person- friend, family or unknown, including a minor. In case the nominee is a minor, the name and address of the guardian of the minor nominee has to be provided. 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 or a religious or charitable trust.

Who cannot nominate in a mutual fund?

A guardian investing in mutual fund units on behalf of a minor cannot nominate for the units. According to Sebi, the guardian also cannot be a nominee in the same account, as it shall be the sole discretion of the minor when he/she attains majority.


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