The new SEBI Circular on nomination forms
The Securities and Exchange Board of India (“SEBI”) issued a new circular on June 15, 2022, titled “Nomination for Mutual Fund Unit Holders” (“Circular”). This circular introduces a new operational change that all Asset Management Companies (“AMCs”) must mandatorily comply with by August 1, 2022.
What is the new change being introduced?
The SEBI has instructed that Investors subscribing to mutual fund units on or after August 1, 2022, shall have the choice of:
Providing nomination in the format specified in fourth schedule of SEBI (Mutual Funds) Regulations, 1996
Opting out of nomination through a signed Declaration form as provided in Annexure - A to the Circular
March 31, 2023 has been set as the deadline by which mutual fund unit holders must submit the nomination form or the opting out of nomination declaration. Failure to comply would result in their folios being frozen for debits.
How can unit holders submit these forms?
AMCs are required under the Circular to give such investors the option to submit either the nomination form or the declaration in physical or online mode.
If a unit holder chooses the physical mode, then he has to sign either of the forms using a wet ink signature.
However, if the unit holder chooses the online mode, then he has to sign either form using “e-Sign facility recognized under Information Technology Act, 2000, instead of wet signature(s)”. This would include Online Aadhar eSign, Aadhaar XML eSign, PAN based eSign and DSC tokens. A cropped image of the physical signature or other alternatives will not be legally valid signatures here.
Who shall carry out all these changes?
The obligation to carry out all these changes has been placed on AMCs.
What is the deadline for implementing these changes?
All investors subscribing to mutual fund units on or after August 1, 2022, shall be given the choice to submit either the nomination form or an opting out of nomination declaration, either in physical or online mode.
How can an AMC ensure compliance with the Circular?
While most AMCs already have a physical nomination process available for unit holders, they will now have to introduce a digital online process as well. For the online process, AMCs will have to make the option to digitally sign both the nomination form and opting out of nomination declaration available to the unit holders.
With Leegality’s document infrastructure platform, you can do so much more than just giving your customers the option to digitally sign the documents.
Ensure no more mistakes with Leegality’s Template Engine
The nomination form and the opting out declaration have standard prescribed formats. You can save them as templates on our Template Engine and automatically pre-fill them with information from your data hubs. Completely eliminate manual data entry mistakes and save time on verifying the same!
Leegality’s complete suite of IT Act recognised eSigns
Give your customers the option to eSign the documents using any of the following eSign types - Online Aadhar eSign, Aadhaar XML eSign, PAN based eSign and DSC tokens.
Be assured of signer identity with Leegality’s security features such as Face Capture, GPS capture etc. You will also receive a time stamped audit trail once all the signatories have eSigned the document. You can read more about our fraud prevention solutions in this blog.
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Wondering how to get started? Don’t worry, simply drop us an email at email@example.com and we will set up a customized DEMO to help you comply with the latest SEBI guidelines with our unified, no-code, easy-to-use dashboard.