Nomination for Trading Accounts — Why It's Now Voluntary and What Brokers Must Still Do
Submission of 'choice of nomination' for trading accounts has been made voluntary as a step towards ease of doing business. Investors opening new trading account(s) may have the choice of providing nomination or opting out of nomination. This article explains the voluntary framework, what brokers must still do, and the documentation requirements for nomination and opting out.
The Regulatory Basis
SEBI Circular SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/23 dated February 24, 2022 made submission of 'choice of nomination' for trading accounts voluntary. In line with Section 72 of the Companies Act, 2013 on nomination by a holder of securities, investors opening new trading account(s) may have the choice of providing nomination or opting out of nomination.
What Changed
Before the Change
- Nomination was mandatory for trading accounts.
- Clients had to provide nomination details at the time of account opening.
- No option to opt out of nomination.
After the Change
- Submission of 'choice of nomination' is now voluntary.
- Investors may choose to provide nomination or opt out.
- Existing investors who have not submitted nomination details can also submit or opt out.
What Brokers Must Still Do
1. Provide the Choice
Brokers must provide clients with the choice of nomination or opting out. The options are:
- Provide nomination through the nomination form (Annexure-12).
- Opt out of nomination through the 'Declaration Form' (Annexure-13).
2. Documentation Requirements
Nomination Form (Annexure-12):
- The nomination form shall be signed under wet signature of the account holder(s).
- Witness shall not be required.
- If the account holder(s) affixes thumb impression (instead of wet signature), then witness signature shall be required.
- The on-line nomination form may also be signed using e-Sign facility and in that case witness will not be required.
Declaration Form for Opting Out (Annexure-13):
- The declaration form shall be signed under wet signature of the account holder(s).
- Witness shall not be required.
- If the account holder(s) affixes thumb impression (instead of wet signature), then witness signature shall be required.
- The on-line declaration form may also be signed using e-Sign facility and in that case witness will not be required.
3. Facilities for Existing Investors
Existing investors who have not submitted nomination details till date and intend to submit their nomination or opt out of nomination may also be allowed to do so by way of two factor authentication (2FA) login on the internet trading platform for Stock Brokers providing such services.
4. Communication to Clients
Stock Brokers shall encourage their clients to update 'choice of nomination' by sending a communication on fortnightly basis by way of emails and SMS to all such UCCs wherein the 'choice of nomination' is not captured. The communication shall provide guidance through which the client can provide his/her 'choice of nomination'.
5. Re-submission Not Required
Re-submission of nomination details shall be optional for the existing investors who have already provided the nomination details prior to the circular.
6. Systems and Confidentiality
Trading Members shall ensure that adequate systems are in place including for providing for e-Sign facility and also take all necessary steps to maintain confidentiality and safety of client records.
Optional Fields in Nomination Form
The details required in the nomination form viz. mobile number, e-mail ID and identification details of the nominee(s)/guardian(s) of the minor nominee(s) are optional.
How We Help
At Anuj Desai & Associates, we help stock brokers implement the voluntary nomination framework, prepare the nomination and declaration forms, and ensure compliance with SEBI's requirements. If you need assistance with nomination compliance, reach out to our regulatory compliance desk.