The Securities and Exchange Board of India (Sebi) has filed the nomination for jointly held mutual fund accounts optional, a move that is seen to promote ease of doing business.
Notably, under the present arrangement, the deadline for all current individual unit holders who own mutual fund units, either alone or jointly, nominate or opt out of nomination is June 30, 2024; otherwise, the folios will be blocked for debits.
Further, the Sebi has also allowed fund houses to have a single fund manager to oversee commodity and foreign investments. This would reduce the cost of managing the fund.
The move came after a working group constituted by SEBI reviewed mutual fund regulations.
Based on its recommendations, a public consultation was carried out suggesting the option to make joint mutual fund account nominations optional and permitting fund houses to have a single fund manager to oversee commodity and foreign investments.
Mutual fund unit holders must provide nomination details in a specified format and opt out of nomination through a prescribed declaration form. If a holder does not nominate or opt out of nomination by 30 June 2024, folios/demat account will be frozen.
According to the Sebi circular, “It has been decided that the requirement of nomination specified under clause 17.16 of the Master Circular for Mutual Funds shall be optional for jointly held Mutual Fund folios.”
Adding further “All other provisions related to requirement of nomination as provided in SEBI Master Circular No. SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/74 dated May 19, 2023and SEBICircular No. SEBI/HO/MIRSD/POD-1/P/CIR/2023/193 dated December 27, 2023, shall remain unchanged.”
In a significant step towards curtailing the fraudulent trades in the Mutual Funds, the Sebi also decided to amend norms governing mutual funds.
As per the amendments, management companies (AMCs) need to put in place an ‘institutional mechanism’ for identification and deterrence of potential market abuse, including front-running and fraudulent transactions in securities.
Sebi said in a statement issued after the conclusion of the board meeting, “The mechanism should consist of enhanced surveillance systems, internal control procedures, and escalation processes to identify, monitor and address specific types of misconduct, including front running, insider trading, and misuse of sensitive information.”