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Mutual Fund Tips: Demat accounts of mutual fund investors will not be frozen if they do not fulfill nomination conditions..

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There is relief news for mutual fund investors. Market regulator SEBI has abolished the rule in which it was decided to freeze demat accounts and mutual fund portfolios in case the investors did not give the option of nomination. That is, if investors have not been given the option of nomination, then they do not need to fear.

SEBI relaxes nomination compliance
According to SEBI, investors holding shares in physical form are entitled to receive any payment such as dividend, interest, or redemption amount. They can submit complaints or request services to the Registrar to the Issue and Share Transfer Agents even without giving the option of nomination.

Earlier, SEBI had set June 30 as the deadline for all existing individual mutual fund holders to either nominate a beneficiary or formally refuse to do so. Failure to follow the rules could freeze their accounts, preventing investors from withdrawing money.

Market participants put forward their views to SEBI regarding this, after which compliance was made easier and SEBI changed its decision for the convenience of investors. SEBI issued a circular on Monday saying that if an investor does not give the nomination option, then the demat account, as well as the mutual fund portfolio, will not be frozen.

SEBI said that action will be taken accordingly on the payments currently stopped by listed companies or RTA due to the non-provision of the nomination option. The regulator said that all new investors/unit holders will be required to mandatorily give the option of nomination for demat accounts / mutual fund folios (except jointly held demat accounts and mutual fund folios).

SEBI's instructions to AMCs
The regulator has asked depository participants, AMCs, or RTAs to encourage demat account holders or mutual fund unit holders to update the nomination option every 15 days through e-mail and SMS to all such investors. It has also been asked to guide demat account holders / mutual fund unit holders to give the option of nomination.

To encourage existing investors to give the nomination option, from October 1, investors will be given a pop-up while logging into the demat account on behalf of the depository and depository participants on the web or mobile platform and while logging into their mutual fund account on behalf of the AMC.

SEBI has also provided a format for giving nominations and exiting nominations in the case of both demat accounts and mutual fund folios. It said that essentially only three things need to be provided for updating nomination details - the name of the person making the nomination, the share of the person, and relationship with the applicant.

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